EDI 2009 Controlling E-Discovery Costs through Records Management

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Controlling E-Discovery Coststhrough Records Management

John RosenthalWinston LLP

Deirdre BrekkePactiv Corporation

Conor R. CrowleyLaw Offices of Conor R. Crowley

Richard R. RobertsFederal Express

November 2009

2009 Georgetown University Law Center’s E-Discovery Institute

The Georgetown University Law 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.

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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

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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

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E-Discovery Risks & Costs

Potential criminal exposure if not done correctly

Increased legal and operating expenses

Heightened legal risk to the company

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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

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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%)

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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)

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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

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Electronically Stored Information?

93% of new information is stored in digital form

7% Paper or other formats

http://www2.sims.berkeley.edu/research/projects

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The Problem Will Only Get Worse

ESI’s Growth Rate – 30% a YearESI’s Growth Rate – 30% a Year

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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

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Current

Estimated %

of Volume Reduction

Post Implementatio

nVariables

Users Supported 4,200 4,200

GB of email 5,000 50% 2,500

GB of Unstructured Data 4,000 15% 3,400

Average GB of email and unstructured data per employee 2.14 1.40

Number of Individuals Involved in Collection 20 20

Estimated cost to collect, process, dedup and produce $128,400 * $84,000based on average price of $3,000 per GB

Estimated % of relevant hits 2% 2%

First reviewPages to be reviewed 64,200 ** 42,000

Attorneys hourly review rate in pages per hour 50 50

Attorney hours to complete review 1,284 840

Associate or paralegal hourly rate $250 $250

Attorneys cost for review $321,000 $210,000

Second reviewEstimated actually relevant pages (%) 25% 25%

Pages to be reviewed 16,050 10,500

Attorneys hourly review rate in pages per hour 30 30

Attorney hours to complete review 535 350

Senior attorneys hourly rate $365 $365

Attorneys cost for review $195,275 $127,750

Total cost for production and review $644,675 $421,750

Net Savings $222,925

* - Calculated by taking the average GB of email and unstructured data per employee multiplied by average price to collect, dedup and process.

64,782 MS Word Files

100,099 Email Files

165,791 MS Excel

17,552 MS Pow er Point

Variable Fields By Client

** - Based on LexisNexis Study of approx. 75,000 pages per GB

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

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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 Modelwww.edrm.net

IdentificationRecordsManagement

Relevance

Production Presentation

AnalysisAnalysis

Review

Processing

Analysis

Preservation

Collection

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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

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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)

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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

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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

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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)

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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)

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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


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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

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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

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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?

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RIM Team

• Who should be on the Team?

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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

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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

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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

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• 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

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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)

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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

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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

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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

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Classification Process

Low High

High

LowCost Savings

Productivity

Accuracy

ManualClassification

Authoring Templates

Rules BasedClassification

Context BasedClassification

MultipleMethods

Simple Rules

Complex Policies

Consistent Participation & Enforcement

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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

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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

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1st Generation E-mail Archiver

Mailbox

E-mail Archive

Back-up Tapes

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Capture

Archive Organize and Classify

Index

Archive

OperationsComplianceDiscovery

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

2nd Generation E-mail Archiver

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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

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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

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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

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• 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 ProcessLegacy Retirement

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1. 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)

2. Compile listing of available index information of legacy inventory, including dates and related systems

3. Eliminate legacy information based upon:– Date ranges– Systems– Data exists on active systems


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4. 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


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