Get Your E-information House in Order
Make sure you’re in compliance with new rules that include electronic communication in the legal discovery process.
By Christine Helwick and Susan Westover
This would not be a far-fetched outcome. In Zubulake v. UBS Warburg, LLC, 2004 W.L. 1620866, op. at 13 (S.D.N.Y. 2004), a court instructed a jury to draw an adverse inference from evidence that was not available (in other words, to assume that information that was lost or destroyed would have harmed the defendant’s case). The jury awarded the plaintiff $29 million.
Electronic information is ubiquitous today. The lawsuit that does not include some form of e-information in the pool of evidence is rare indeed. But the rules that outline the parties’ responsibilities for the maintenance and preservation of such information so that it is available when the case comes to trial have been slow in coming. The deliberate and unhurried process whereby the law continues to develop cannot keep pace with the rapid-fire growth of new technology.
At the same time, many judges, by virtue of age, are unfamiliar or uncomfortable with technology. Some still do not use electronic devices in their work. Yet, they have been propelled into the role of making ad hoc rules to manage the use of digital information, which inevitably shows up as evidence in their courtrooms. The results have been inconsistent and sometimes draconian.
In April 2006, the Federal Rules of Civil Procedure were amended in an attempt to bring some order to use of electronic information in litigation. These changes, which took effect December 1, 2006, specifically address the preservation and discovery of electronically stored information and are applicable to civil cases heard in federal courts. The amendments are also becoming the model for the process in the state courts.
Given this new legal environment, educating employees and managing resources to address the challenges that e-discovery presents must take place now—before information is destroyed or litigation is filed. The process must cross the boundaries of all divisions at your institution.
Understanding Litigation Holds
E-discovery considerations are relevant even before a lawsuit is filed. It has long been the rule that evidence that could become relevant in a later dispute must be preserved. In Kronisch v. United States, 150 F.3d. 112, 130 (2nd Cir. 1998), a court applied that principle for the first time to the transitory and prolific world of electronically stored information. The ruling held that parties have an obligation to identify, segregate, and store all relevant information, including electronic information, before it is written over or otherwise destroyed, whenever litigation is “reasonably foreseeable.” This is now commonly referred to as implementing a “litigation hold” or preserving electronic evidence in anticipation of a lawsuit.
The courts have not been particularly helpful in establishing any bright line as to when litigation should be considered “reasonably foreseeable.” The cornerstone case, Zubulake v. UBS Warburg, LLC, 229 F.R.D. 422 (S.D.N.Y. 2004), found that an employee’s filing of a discrimination charge with the Equal Employment Opportunity Commission was enough to put her employer on notice immediately to preserve all information about her employment. Other situations that might warrant a litigation hold include a major accident or personal injury; a police report of a significant incident; a government tort claim filing; a special investigation or regulatory audit (particularly if complaints are corroborated); employee terminations; receipt of a demand letter or other communication from an attorney; and a plan to sue by the party itself.
Until more specific guidelines are established in the law, each situation will have to turn on its own facts and on the experience in the locale where the claim has arisen. In some jurisdictions, for example, the filing of a discrimination charge almost always guarantees the filing of a lawsuit. In others, however, thousands of filings are commonplace yet ultimately yield only a few actual lawsuits. This information has a bearing on what triggers a litigation hold.
Once a litigation hold is in place, it means that ordinary document retention must be interrupted and potentially relevant information segregated and separately stored. The rule applies to hard-copy and all forms of electronic information: e-mail, voicemail, information on handheld devices and flash drives, text and blog messages, photographs, and so on. The legal focus in the early cases has tended to be mostly on e-mail; but as the millennial generation moves into the workforce, other forms of electronic communication are just as likely to become important as evidence.
The information that must be preserved will vary widely depending on the nature of the underlying dispute. An employment dispute, for example, clearly implicates the complaining employee’s personnel file. If the claim, however, is that an employee was not treated fairly in comparison to others, then personnel files of the cited employees may also be involved. It is the obligation of the party with the information to deduce what the likely claims will be when litigation is ultimately filed, determine what needs to be preserved, and identify and instruct the persons with the relevant information to ensure that none of it is destroyed.
Reviewing the New Federal Rules
After the litigation is filed, the new federal rules impose additional obligations—and provide opportunities. If you are well-prepared to manage these opportunities, a good possibility exists of limiting what otherwise could be disastrous consequences. Here are some significant actions required by the new rules:
- Holding pre-trial conferences: Rule 26 compels the parties to attend an early conference to sort out discovery issues. This provides a key opportunity to reach agreement as to the proper scope of the search for electronic information, including validating or modifying the scope of an earlier litigation hold. During this initial meeting, the parties can sort out what electronic information is necessary for the case, the form in which it should be produced, and the time periods covered. If the institution’s attorneys do not take full advantage of this opportunity to establish reasonable boundaries on the other side’s access to electronic information, it could later result in more costly discovery. That might include, for example, depositions of IT personnel and even direct access by the other side into the institution’s electronic communication systems.
Moreover, if college and university attorneys are not well educated about the intricacies of the institution’s electronic infrastructure before they attend this conference, they are bound to make serious mistakes. They could easily commit the institution to discovery responsibilities that are needlessly expensive or impossible to fulfill. Now that digital information is such a significant part of litigation, chief business officers need to be aware of the time and resources that will be required to bring the institution’s attorneys up to speed. That learning curve includes not only the facts of the claim but workings of the institution’s electronic communication systems. With careful preparation, attorneys can represent the institution on these issues and minimize the potential burdens of the e-discovery process on both financial and human resources.
- Addressing duty of disclosure: The obligation to preserve electronic information is separate from the obligation to provide such details to the other side. Rule 26 requires the preservation of all relevant information but the production of only what is “reasonably accessible,” based on burden and cost. Hard drives and frequently accessed local storage devices are almost always accessible. Other electronic records—such as files that are compressed, disaster recovery systems, or backup tapes—may only need to be described, not produced.
Sometimes the volume alone can determine accessibility, particularly in cases for which it would be extremely difficult to separate relevant from irrelevant information (for example, where a common search term is used). If the requesting party argues that files that have been labeled inaccessible by the responding party are truly accessible and/or necessary to the issues in the case, the party with the information must demonstrate the burden and cost that would be required to produce what has been withheld. The court may still require information to be produced if the requesting party can demonstrate good cause that the benefit of obtaining it outweighs the cost of doing so.
The court has the power to shift the cost of production in whatever manner it deems just to fit the circumstances of the case. However, courts do not look kindly upon the intentional relocation of accessible information to an inaccessible source. In Quinby v. WestLB AG, 2006 WL 2597900 (S.D.N.Y. 2006), the court refused to shift the cost of restoring e-mails that had been converted to a less accessible format. The initial classification of accessible and inaccessible electronic information must involve IT professionals working in close collaboration with the institution’s lawyers. The lawyers need to be well educated to be able to defend those classifications in court and to offer convincing arguments for shifting costs.
- Producing electronically stored information: Rule 34 permits the party requesting electronic information to specify the preferred format in which the information will be produced. The responding party may then object and suggest alternative forms. The early conference is the ideal time to reach an understanding on this matter. But, once again, the institution’s attorneys must be knowledgeable about how e-information is maintained in the ordinary course of business and what other forms—which are also “reasonably usable”—also exist in the systems.
The rules are less clear about when and whether electronic information must be preserved or produced in its original (or native) format so that metadata (information about the message, which is embedded within it) is not lost. In Wyeth v. Impax Labs, Inc., 2006 WL 3091331 (D. Del. 2006), the court announced a “general presumption against the production of metadata.” However, in Williams v. Sprint/United Mgmt.Co., 230 F.R.D. 640 (D. Kan. 2005), another court ordered the production of metadata for electronic spreadsheets, because it was claimed that the defendant had manipulated the data. The early conference is the time to clarify whether metadata need to be preserved, which will depend on the particular issues in the case.
- Considering attorney-client privilege: One of the most interesting aspects of the amended rules is the preservation of the attorney–client privilege. The volume of electronic records is far more massive than that of hard-copy files, and data are stored in formats that are difficult to review. The discovery process would be interminable if all e-information was reviewed and culled—as hard-copy records have been in the past—to remove privileged information before it is provided to the other side. To accommodate this reality, Rule 26 includes a provision that for the first time allows for the return (or “claw-back”) of privileged information that is inadvertently produced. This protected information may not thereafter be used as evidence in the litigation, but the law has not yet answered the question of how to unring this bell.
Establishing Practical Processes
The most recent amendments to the federal rules further emphasize the necessity for higher education institutions to establish processes for implementing litigation holds and managing subsequent litigation that involves electronic information. Consider creating a system that includes these important steps:
1. Assign clear responsibility. An individual or group must have responsibility for evaluating situations and determining which ones call for implementing a litigation hold in anticipation of litigation. These decisions are not well suited to an ad hoc, or after-the-fact, process that often results in it being too late to retrieve information that has already been destroyed. Train key employees to recognize potentially adverse situations and bring them to the decision maker(s), who then must be ready to make quick judgments about whether to implement a litigation hold (see sidebar, “Digital-Age Discovery Plans”).
2. Establish an interdisciplinary work team. General counsel, along with identified representatives from human resources, risk management, IT, and the department for which litigation is pending, all have potential roles to play in implementing and managing litigation holds. Once a litigation hold is invoked, the interdisciplinary team must work together to determine what steps to take to effectuate the preservation of electronic information. There is no single formula. The nature of the dispute will dictate the type of records that must be preserved. The team will then need to determine where this information is likely to be located and which employees are likely to have it.
3. Document when and why decisions are made. It is a good idea to create a log to record litigation hold decisions. It can be a simple document, in either hard or electronic copy, with all decisions recorded in one central location or separately in each individual file. Record the date on which the matter was considered and include a brief notation of the rationale for implementing or not implementing the litigation hold. Courts will give more latitude, even if they disagree with the decision reached, if there is evidence of a regularized decision-making process.
4. Communicate clearly with staff who have relevant information. Identify one individual who will be responsible for communicating with employees who possess information that is subject to the litigation hold. Make it clear that staff understand the nature of their personal obligations to preserve evidence on their computers and elsewhere, and give them clear direction as to what they must do. Insist that the communication be in writing and that technical instructions be in plain English and easy to understand. This initial communication identifies whom to contact if there are questions. It frames the instructions as an employment expectation and states that disciplinary consequences will follow if the directive is not heeded.
All of this will be awkward and time consuming the first time through. Until institutions gain some experience and litigation holds become more generally accepted, expect and tolerate some disruption of normal operations.
Working Together to Avoid Pitfalls
|Digital-Age Discovery Plans|
Prepare to address e-discovery issues before your institution experiences its first litigation hold or e-discovery request. Consider the following questions as a basis to evaluate how well prepared your institution is to deal with the legal issues raised by electronically stored information:
Have you created and enforced a document-retention-destruction policy? A “safe harbor” exists for documents destroyed in accordance with a regular schedule established under a reasonable document retention plan. Rule 37 of the Federal Rules of Civil Procedure extends this protection to “the routine, good-faith operation of an electronic information system.” Of course, if the retention plan is not consistently followed and some documents are destroyed on schedule while others are not, this may be worse than having no plan at all. Moreover, it is important to remember that once a litigation hold is in place, its purpose is to interrupt the regular destruction of the information that is subject to that hold. In Miller v. Holzmann 2007 WL 172327 (D.D.C. 2007), an employee who had not been informed about a litigation hold destroyed information in accordance with a normal destruction schedule, and this action resulted in a recommendation for an award of sanctions.
Does your computer-use policy contemplate litigation holds? Employees need to understand that the law requires information that is on their computers to be preserved and/or produced in the event of litigation. To underscore this reality, include in your institution’s computer-use policy language that diminishes employees’ expectation of total privacy of their computers’ contents. This position goes against long-standing traditions in higher education, particularly for faculty, and will likely be the most challenging advice to follow.
Do you have an e-discovery plan? When considering a thoughtful advance plan to deal with e-discovery issues, answer at minimum the following questions:
By thinking through the list of individuals who need to be involved at each stage of the process, your institution is more likely to approach e-discovery in an interdisciplinary manner.
Should you use outside vendors? For the right case, a broad array of outside providers can be ready to help develop strategy, as well as to sort, store, retrieve, and/or review information. Sophisticated software can separate what is relevant, remove duplicate copies, and begin to identify what records might be privileged. Outside vendors can also provide reliable cost estimates to persuade the courts that information is not reasonably accessible. The problem for many higher education institutions is likely to be that potential cases may not justify the cost of these services, even though courts may expect the same capacity and versatility that would be available if these resources were used. For more information on selecting e-discovery vendors, visit http://www.thesedonaconference.org/content/miscFiles/RFP_Paper.pdf.
Have you begun training and communication about e-discovery? These new requirements are not intuitive, especially to the premillennial generations who did not grow up with technology. Lawyers report that they spend lots of time thinking about how to comply with the demands of these new rules—and worrying that few others, particularly at the highest levels in the organization, are spending any time thinking about the issues. Every employee in your institution will at some time require training to understand the nature and scope of e-discovery requirements.
Requiring employees to preserve electronic information for the benefit of the institution’s defense in litigation will likely present significant challenges. Colleges and universities are traditionally environments in which employee independence is fostered and encouraged. Employees who have laptops, travel with laptops, work from home, or have more than one computer on site are likely to struggle against the institution gaining access to what they instinctually feel is their personal store of information.
Nontechies may resist becoming conversant about the technical aspects of e-information: learning where information is stored (on computers and elsewhere in the institution’s system); knowing what period of time a hold covers; understanding what it means to delete or archive information; learning terms like “metadata;” and so on. Similarly, techies may seek to ignore legal requirements that create more work and require them to “translate” technical information into terms that are understandable by nontechies.
It may be tempting for chief business officers and others in the academic community to believe that all of this is the “lawyers’ problem” and to leave it to the lawyers to solve. This would be a mistake. It is true that these issues arise only in the context of litigation and that lawyers will ultimately have to provide information and opinions in the courts. But, consider whether you want your institution’s lawyers, unlikely to be thoroughly conversant with the peculiarities of the institution’s information systems, to make commitments—impacting financial and human resources—with which the institution will ultimately have to live. E-discovery, after all, is a complex institutional issue with many interdisciplinary aspects that call for various components of colleges and universities to work across their traditional silos on a common result.
The consequences of not establishing and implementing an effective institutional process can be extreme. As yet, no appellate decisions have involved higher education institutions, however, many examples in the corporate world demonstrate how badly things can go. In United States v. Philip Morris USA, 327 F.Supp.2d 21 (D.D.C. 2004), the court refused to allow the senior executives of the corporation to testify, because they had failed to follow internal procedures to preserve relevant evidence. In Coleman Holdings, Inc. v. Morgan Stanley, 2005 WL 679071 (Fla.Cir.Ct. 2005), even though 1,300 pages of electronic communications were produced, the court would not excuse the failure to provide backup tapes. It sanctioned Morgan Stanley for “withholding” evidence. The plaintiff recovered a $1.5 billion verdict (later reversed on unrelated grounds). In Metropolitan Opera Association v. Local 100, Hotel Employees and Restaurant Employees Int’l Union, 212 F.R.D. 178 (S.D.N.Y. 2003), the court entered judgment against the defendant because of the failure to produce evidence.
In all of these cases, too much of the control and management of the electronic discovery process was left to the lawyers. They made serious mistakes because they failed to gain sufficient knowledge and expertise—before they went to court—about the technology systems in the organizations they represented.
We encourage you as chief business officers to grasp the significance and impact of these new rules and to support what is necessary at your institution to meet the related challenges. Now—before you are hit with a significant claim—is the time to begin the dialogue across departments and entities of your institution to find solutions. The lawyers will most likely take the lead, but the work involved in this process is everyone’s problem. We spent a full year introducing this topic to presidents, provosts, business officers, human resource professionals, chief information officers, and others throughout The California State University System. Solutions began to emerge only as the institution faced its first litigation holds, and all of these groups had to work together to address the issues. Similarly, every member of the college and university community must invest time to adapt to the complex demands of the new world of e-discovery.
- Some Cash Management Changes Apply to All Institutions
- NACUBO Summarizes Regulations on Banking, Processing Relationships
- Education Funding Depends on Devil in the Details
- 2016 Intermediate Accounting and Reporting - Winter
January 25-26, 2016
- 2016 Facilities and Administrative Rates - Long Form
January 25-26, 2016
- ON-DEMAND: Understanding ED's New Cash Management Rules
- ON-DEMAND: A Financially Sustainable Approach to Innovate Academic Programs
- ON-DEMAND: Legislative Lunchcast: A 30-Minute Washington Update from NACUBO
- ON-DEMAND: Developing Your Campus Distance Learning Strategy
- ON-DEMAND: VIRTUAL: 2015 Annual Meeting
- ON-DEMAND: NACUBO Live!: CBO Speaks
- ON-DEMAND: A Just-in-Time Webcast to Explain FASB’s NFP Reporting Proposal
- ON-DEMAND: Decoding ED's Cash Management Proposal
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis