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  • Alitia
  • Gina
  • Jim
  • Gina Q: How are you seeing people handle this issue in practice? Does the responsibility usually fall to legal? And if so, how does legal receive the information in a timely manner so that it can make a decision?
  • Jim
  • Alitia
  • Alitia Q: One of the criticisms that I ’ve heard about the eDiscovery sanctions cases is that it takes a lot of bad conduct before a “real” sanction is awarded. In turn, this doesn’t have the deterrent effect that people would like. Does Pension Committee affect that way of thinking?
  • Q: I have seen several cases now where a moderate sanction has been awarded, with the judge reserving the right to award a more serious sanction later after all of the facts have been further developed. How does that affect a case?
  • Alitia + Jim
  • Jim - transition
  • Gina
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  • Alitia
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Mc Carterand English 06152010 F Mc Carterand English 06152010 F Presentation Transcript

  • EMC SourceOne eDiscovery – Kazeon Best Practice Webinar Series with McCarter & English “ DOCUMENT RETENTION & EMPLOYEE TERMINATIONS: INCREASED RISK OF ESI LOSS IN TODAY'S ECONOMIC UNCERTAINTY” © Copyright 2010 EMC Corporation. All rights reserved.
  • Presented by: Alitia Faccone, Esq. Partner Gina Trimarco, Esq. Associate James D. Shook, Esq. Director, E-Discovery and Compliance Legal Group (973) 848-5376 (678) 261-7703 (973) 848-5328 [email_address] [email_address] [email_address] INCREASED RISK OF ESI LOSS IN TODAY'S ECONOMIC UNCERTAINTY DOCUMENT RETENTION & EMPLOYEE TERMINATIONS: McCarter & English, LLP EMC Corp.
  • TIMES HAVE CHANGED downsizing layoffs terminations mobility CD personal email USB drive DVD paper hard files Departing employees trigger risk of data loss
  • TIMES HAVE CHANGED Generations X & Y
      • Seek highest pay and best working conditions
      • Seek meaning and purpose
      • Career aspirations vs. family & personal interests
      • “ Company people” who created the 60-hour work week
      • Individuals born between ‘57 & ‘64 held an average of 10.8 jobs between the ages of 18 and 42
    Baby Boomers Silent Generation
      • 60% of the workforce was unskilled
      • “ Organization Man”
      • Security/Risk adverse
    Employee mobility vs. Loyalty
    • Good news? Nation ’s unemployment rate fell to 9.7% in May from 9.9% in June.
    • Underlying numbers show:
      • Decrease reflected 322,000 people dropping out of the labor force.
      • Almost all new job growth was attributed to 411,000 temporary census workers hired by the federal government.
      • Long term unemployed (out of work for 27 or more weeks) remains at its highest level since the 1940s.
    TIMES HAVE CHANGED Current economic recession has resulted in high unemployment created by both reductions in force and performance based terminations Job market U.S. Labor Department Monthly Report
    • Why worry about ESI at termination:
      • Departing Employee Litigation
      • Employee Data Theft (Proprietary Information, Trade Secrets, Customer Data, etc.)
      • ESI Subject to Litigation Hold (i.e., other than the employee case)
      • Employee Data Subject to Retention (Compliance / Regulatory)
    What are the risks?
    • Reallocation of hardware
    • Deletion of departing employee docs - email, server & ESI storage accounts
    • Consideration of data on home or personal storage devices
    Termination increases risk of destruction
    • Departing employees could mean departing data
    • One week – Three cases
      • Goldman Sachs – data theft and client theft
      • Sergey Aleynikov & Credit Suisse
      • Morgan Stanley Smith Barney LLC v. Steven Ayer et al.
  • Why employers should be concerned
    • Ponemon Institute Survey “Data Loss Risks During Downsizing, As Employees Exit,
    • so does Corporate Data ” (February 23, 2009)
    • WHO - 59% of departing employees steal confidential data from their employers; 79% of those employees understood their employer did not permit them to leave with company data
    • WHAT - 61% took information in the form of paper documents or hard files; 53% downloaded information onto a CD or DVD; 42% downloaded information to a USB drive; 38% sent attachments to a personal email account
    • HOW - 82% said their employers did not conduct a review of their paper or ESI in connection with their departure
    Data loss is not uncommon : EMPLOYEE TERMINATIONS
  • Source: “Trends in Electronic Discovery”, Electronic Strategy Group (B. Babineau), Nov. 2009 WHY EMPLOYERS SHOULD BE CONCERNED: 2010 e-Discovery trends 78% 53% 46% 84% 87% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Lawsuits Increased In 2009 Expecting 20%+ Increase in 2010 More Regulatory Inquiries Active e-Discovery Project 2010 Tech Budget for e-Discovery
    • When do retention obligations arise: During Internal Investigation? Prior to Litigation? At the Outset of Litigation?
    Retention obligations RISK OF DESTRUCTION
    • Scope of a Party ’s Preservation Obligation - 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
    • Credible Threat - In general, the duty to preserve documents arises when a party has reasonable notice of a potential or actual litigation, examination, or investigation, also identified as a “credible threat” of litigation
  • Serious stuff
    • In-house counsel personally sanctioned and adverse inference ordered for not doing enough (Swofford v. Eslinger)
    • Adverse inferences and “black letter” requirements (Pension Committee)
    • Slightly more lenient standard - but result still adverse inference (Rimkus)
    • Reversal of significant verdict for email spoliation (Lockheed v. L-3 Communications)
    • Requiring “violation” of Malaysian law to comply with US Litigation (Gucci v. Curveal; Cf. AccessData v. ALSTE)
    • Dismissal for spoliation (Bray & Gillespie v. Lexington)
    • Having custodians “click through emails” does not meet discovery burden (Mirbeau v. City of Lake Geneva)
    10x Costs To Outsource $1.5M Avg Cost Per Incident $34M Avg Annual Legal Costs 89% Companies Face Litigation $18M+ Review 1 TB of Info RISK OF DESTRUCTION
  • Internal Investigations: Advance warning of potential risk
    • Internal Investigations Can be Tricky:
      • Legal problems
      • Morale
      • Reputation
      • Data loss
    Consider Scope of Investigation:
      • Need to know basis
      • Key - to decide what to retain upon the conclusion of the investigation
    Are Ordinary Retention Policies Sufficient? 12 RISK OF DESTRUCTION
    • Judge Scheindlin ’s concept framework:
    • The level of culpability
    • The interplay between the duty to preserve and the spoliation of evidence
    • Which party has the burden of proving that evidence was lost and the resulting consequences of the loss, and
    • The appropriate remedy for the harm caused by the loss
    The Pension Committee v. Banc of America Securities (S.D.N.Y. Jan. 15, 2010) Latest and greatest –
    • Judge Rosenthal – Dueling Opinions?
    • Generally agreed with Pension Committee
    • Distinguished the level of culpability necessary to merit an adverse inference instruction
    • Took a different approach on how to give such instructions
    • Cautions courts to avoid overuse of e-discovery sanctions, which can divert focus from the more important facts and merits of the case
    • Addressed allegations of intentional spoliation, unlike the gross negligence at issue in Pension Committee
    Rimkus Consulting Group v. Cammarata , 2010 U.S. Dist. LEXIS 14573 (S.D. Tex. Feb. 19, 2010) Latest and greatest –
  • e-Discovery best practices – minimal requirements? Pension Committee v. Bank of America Securities, et. al. aka “Zubulake Revisited” RISK OF DESTRUCTION = RISK OF SANCTIONS Requirement Written Litigation Hold Notification Notify formally in writing, document responses, etc. Identify Key Custodians Determine appropriate scope – interview, review documents, etc Preserve Key Custodian ESI Know the repositories, have access for collection, tools to do the work Cease Deletion of Email Critical repository – don ’t forget local caches (PSTs/NSFs) Preserving Former Employee ESI in “Care, Custody, Control” What do you do at exit? How do you find the data? Preserve Backups when only source of key data Don ’t get caught in the backup trap
    • GOALS
    • Safeguard Data
    • Don ’t be Anti-Social
    • Maintain Regulatory Compliance
    • Obtain Strategic Litigation Advantage
    • Control Costs
    To evaluate and minimize risk
    • Critical Business Strategy and Preparation for Litigation that Helps to Avoid Sanctions/Disfavor by the court
    • Have a defensible document retention policy in place
    • Ensure compliance
    *An effective plan saves money SAFEGUARD DATA How a retention plan helps
    • NOTICE – Disclosure of monitoring and discipline to help curtail rule-breaking. Inform that there may be discipline (incl. firing) for personal use, such as visiting pornographic sites).
    • SIGNED CONSENT - Employees should sign a form acknowledging an employer ’s right to monitor as required in several states.
    • PROFESSIONALISM - Remind employees formally about professionalism in email, etc.
    • SOCIAL NETWORKING - Keep records of the employees ’ social media communications and have employees sign computer use policies.
    • Seek legal advice when preparing, developing and initiating a records retention policy
    Policy v. No Policy
    • Companies without policies and content archiving solutions
      • experience a greater level of risk
      • have a higher cost of litigation
    • NOTICE - Where a company elects not to monitor regularly, it should reserve the right to monitor permitting the company to read messages when necessary.
    Data Retention Plans
  • Web 2.0 soon? Too late, it ’s here IDC, Survey Shows Glimmers of Hope for Government Web 2.0 , Adelaide O'Brien , 8/26/09 TIMES HAVE CHANGED 48% 33% 44% 38% 44% 28% 26% 25% 13% 10% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Blogs Wikis Facebook YouTube Virtual World (Second Life) Industry Government
    • What exactly is social media?
      • Wiki says:
    • Social Media “supports the democratization of knowledge and information, and transforms people from content consumers to content producers.”
    • Wikipedia, Social Media, at http://en.wikipedia.org/wiki/Social_media (last visited April 15, 2010).
    The advent of social media DON ’T BE ANTI-SOCIAL
    • Social networking
      • 11% of all time spent online in the U.S.
      • 234 million people age 13 and older in the US used mobile devices in December 2009
      • 1 billion tweets in December 2009, 40 million tweets per day, on Twitter
      • More than 25% of U.S. internet page views occurred at top social networking sites in December 2009 – increase of 13.8% from previous year
    • Communication – blogs, micro blogging, social networking
    • Collaboration – wikis, social bookmarking
    • Multimedia – photo, art, video sharing, live calling
    • Reviews – opinion
    • Community – Q&A
    SOCIAL MEDIA IN ACTION Examples of social media Twitter FaceBook LinkedIn Wikipedia Flckr, YouTube Skype Answers Yahoo
    • Consider policies where social networking is used in business context to:
      • Connect with customers
      • Connect with clients
      • Connect with employees
      • Prohibit/limit employee use
    • RISKS
      • leaking of proprietary information
      • potential liability exposure
      • potential damage from viruses or spyware
      • potential drain on employee productivity
      • bandwidth issues
    • TIPS
      • Have employees sign computer use policies
      • Keep records of the employees ’ social media communications
      • Storage issues/preservation issues
    • Policy-Driven Outcomes:
      • Stengart v. Loving Care, No. A-16-09, 2010 WL 1189458 (Mar. 30, 2010)
      • Quon v. Arch Wireless Operating Co. , 529 F.3d 892 (9th Cir. June 18, 2008)
      • Lake v. City of Phoenix , 218 P.3d 1004 (Ariz. 2009)
      • Hays Specialist Recruitment (Holdings) Ltd. v. Ions , [2008] EWHC 745 (Ch.) Apr. 16, 2008
    • Dynamic nature of ESI discovery issues:
      • Scope of discovery as it relates to Social Media
      • Preservation of Social Media content
      • Collection of Social Media
    • Personnel or employment records (the Americans with Disabilities Act)
    • Records containing specific employee information (the Age Discrimination in Employment Act)
    • Records of insurance premium payments of employee benefits; payroll slips; timesheets; records relating to leave time; and employee benefits (the Fair Labor Standards Act and the Family and Medical Leave Act, or FMLA)
    • Records of exposure to hazardous materials monitoring (the Occupational Safety and Health Act)
    • Test papers completed by applicants for any position that discloses the results of an employer-administered aptitude test (the Age Discrimination in Employment Act).
    • Pay discrimination papers (the Lilly Ledbetter Fair Pay Act)
    • Also review federal employment laws for keeping documents (e.g. HIPPA, COBRA, USERRA, OSHA, NLRA, ERISA, IRCA, EPA, FCRA)
    Know what records to retain and for how long
    • The Sedona Conference Cooperation Proclamation:
      • [A] coordinated effort to promote cooperation by all parties to the discovery process to achieve the goal of a “just, speedy, and inexpensive determination of every action.”
  • OBTAIN LITIGATION ADVANTAGE Using cooperation to your client ’s advantage
    • Avoid waiver and undue delay
    • Seek and provide discovery from the most relevant, convenient, least expensive sources available
    • Discuss scope of preservation
    • Proportionality Doctrine
      • Use analysis to limit or expand the scope and extent of discovery; Rule 26(b)(2)
    • Is the burden of the requested discovery greater than its potential benefit to the case?
      • Cost analysis
      • Societal interests
  • COST SAVING STRATEGIES Negotiate scope
    • Get an early handle on the key case issues – saves money, time, sanctions, and acid reflux
      • Understand your case – who is involved, what are the issues, what exists, where is it located
      • Control the type, timing amount, and method of electronic discovery that will be conducted
      • Determine who should be bearing the costs of production
      • Staging Discovery
    • Reduce the volume of material to review
      • Early case assessment
      • Data sampling
      • Clustering tools
      • Use in privilege review
      • Bringing e-discovery and electronic records management in-house
    COST SAVING STRATEGIES New and emerging technology
    • “ We are drowning in nformation
    • and starved for knowledge. ”
  • Question and Answers © Copyright 2010 EMC Corporation. All rights reserved. McCarter & English www.mccarter.com Alitia Faccone, Esq. Partner [email_address] Gina Trimarco, Esq. Associate [email_address] EMC www.emc.com - www.kazeon.com James D. Shook, Esq. Director, E-Discovery and [email_address] Compliance Legal Group