Case Blurb: Benefirst; Good Cause Analysis-Seventh Factor

[Ed.-The court found that medical claim forms, requested by Plaintiff, would not be reasonably accessible. It then launched into an analysis to determine whether plaintiffs proved that “good cause” existed to compel production notwithstanding the accessibility issue. This blurb is from the analysis of seven factors. These are factors four and five: The likelihood of finding relevant, responsive information that cannot be obtained from other, more easily accessed sources; and Predictions as to the importance and usefulness of the further information;]

The parties resources.

While the Defendant has understandably engaged in a lengthy discussion of the cost of production, neither party has provided the court with any information about their resources. BeneFirst does represent that they no longer have a full time staff and that in order to retrieve the images that they would have to hire temporary help. At the same time, as previously noted, the Plaintiffs have significantly narrowed the breadth of their request and therefore, the time and cost for BeneFirst to produce the requested information should be significantly reduced.

Given the lack of information available to the Court, this factor is neutral.

W.E. Aubuchon Co., Inc. v. BeneFirst, LLC, 245 F.R.D. 38 (D. Mass. 2007)

Case Blurb: Benefirst; Good Cause Analysis-Two factors on redundancy and availability of data

[Ed.-The court found that medical claim forms, requested by Plaintiff, would not be reasonably accessible. It then launched into an analysis to determine whether plaintiffs proved that "good cause" existed to compel production notwithstanding the accessibility issue. This blurb is from the analysis of seven factors. These are factors two and three: The quantity of information available from other and more easily accessed sources; and The failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources.]

The gravamen of the Plaintiffs’ Amended Complaint is that BeneFirst mishandled their employees’ medical claims by failing to determine eligibility for payment, the availability of co-payment and co-insurance, and subrogation. The processing of the claim forms was presumably the mechanism for making these determinations. While the Amended Complaint and subsequent pleadings are silent, the relevant time period appears to be from 2001 to 2004.*

*I so find because this litigation was commenced in 2005 and it seems safe to assume that none of the original claim forms and medical bills were still in existence at that time (if they were, BeneFirst presumably would have retained them).

According to BeneFirst, the original claim forms and medical bills were processed by hand, kept for 60 days, converted to a digital image and then destroyed. Therefore, digital images which constitute the information requested by the Plaintiffs are in the custody and control of BeneFirst and are not available through any other source.

These factors favor the Plaintiffs.

W.E. Aubuchon Co., Inc. v. BeneFirst, LLC, 245 F.R.D. 38 (D. Mass. 2007)

PC World article discusses data management

Although the main theme of the story is about the challenges of data management, it begins with the statement that many don’t trust the technology behind EDD and document management:

But Robert Eisenberg, vice president of e-discovery consulting at Capital Legal Solutions of Falls Church, Virginia, raised concerns about technologies such as software that manages document retention and litigation workflow. “I don’t want to sound like a Luddite, but I actually think there’s a danger on relying on tools that are supposed to be doing things that you’re not monitoring,” he said.
Many companies are looking for the Holy Grail of technology that takes care of e-discovery issues without much human intervention, but often what’s needed when a company is facing a lawsuit and needs to track down information is face-to-face contact, Eisenberg said. “The convergence we need is a convergence of grey matter, the way people think of an existing technology, rather than looking for that Holy Grail,” he said. “There’s a danger in even looking for it.”

There are a couple of points I’d like to make here. First, I agree that automating the process as much as possible is an important goal, but I don’t consider it the holy grail. That title, in my humble opinion, is reserved for actually processing files (all file types, thank you) correctly. I’ve seen applications that can’t reach embedded files, I’ve seen some that can’t handle contained files (files within zip files, for example); I’ve seen databases dismissed without being searched; etc…etc…etc…

Get the processing down while you’re traveling the yellow brick road to automation.

There are those progressives who think that the Mr. Eisenbergs of the world need to get with the program:

[Orca Tech co-founder Herbert] Roitblat also made a pitch for tools that search and group documents when corporations are required by courts to save information. “The days of going through page by page by page … those days are gone,” he said. “Nobody can afford it.”

It is true that so-called linear review is often unmanageable in many cases, but I am, nevertheless, sympathetic to those attorneys who want their eyes on every document…after all, they are dealing with the very evidence from which they will build their case in court.

[HT: Information Governance Engagement Area]

New U.K. anti-terror law used to demand encryption keys

A law billed by the British government as a tool for fighting terrorism has been turned against an animal rights activist, who has been informed that she must provide encryption keys so that police may decrypt files on her computer. If she fails to comply, she could face two years in jail. The twist in this story is that she claims that she never stored any encrypted files on her computer:

The contentious measure, introduced after years of consultation, was sold to Parliament as a necessary tool for law enforcement in the fight against organised crime and terrorism.

But an animal rights activist is one of the first people at the receiving end of a notice to give up encryption keys. Her computer was seized by police in May, and she has been given 12 days to hand over a pass-phrase to unlock encrypted data held on the drive - or face the consequences.

The woman, who claims to have not used encryption, relates her experiences in an anonymous posting on Indymedia.

[HT: Slashdot]

Case Blurb: APC Filtration; Court explains why disposal of a computer containing discoverable information was improper

In order for [the] duty [to preserve the computer] to exist, the computer and its contents must have been discoverable under Rule 26 and [possessors of the computer] Becker and SourceOne must have had reasonable notice that the computer or its contents could be the subject of future discovery requests. In this case, both conditions are met.

Under the liberal standard of discovery relevance, material is discoverable if it is admissible or “reasonably calculated to lead to admissible evidence.” Fed. R. Civ. P. 26(b)(1). In this case, the allegations that support APC’s claims center on Becker’s conduct in communicating with various suppliers and customers within the vacuum filter and bag industry as well as his alleged misappropriation of proprietary information that was stored in computerized form. Becker stated in his affidavit that he used the computer for both business and personal reasons. Given the nature of the allegations and Becker’s use of the computer for business purposes, the contents of the computer were clearly discoverable.

Furthermore, Becker and SourceOne had reasonable notice that the computer could become the subject of discovery requests at the time that Becker threw the computer away. APC’s complaint was filed on March 15, 2007, and counsel for Defendants made his initial appearance on March 19, 2007. Becker admits to throwing the computer away sometime after March 21, 2007. As discussed above, notice of a complaint can put a litigant on notice that evidence is likely to be requested, triggering the duty to preserve. Cohn, 1995 WL 519968 at *5. In this case, Becker had notice based on the nature of APC’s allegations that the computer could become part of the discovery process. Because the computer’s contents were discoverable and Becker had reasonable notice that the computer could become the subject of a discovery request, Becker had a duty to preserve the computer as evidence prior to the date on which he discarded it. Therefore, this Court may impose sanctions pursuant to its inherent power.

APC Filtration, Inc. v. Becker, 2007 U.S. Dist. LEXIS 76221 (N.D. Ill. Oct. 12, 2007)

Kroll Ontrack has new tool for erasing data

Kroll Ontrack has issued a press release saying that the company has developed a new, “enterprise-wide erasing” product.

Helping companies protect against security breaches and comply with laws and regulations regarding data retention and privacy, Ontrack Eraser deletes all traces of information stored on targeted media, making recovery impossible.

If it does all the press release claims, it will be a highly useful tool.

E-Discovery Pitfalls: Uncharted Territory

The story of Phoenix Four v. Strategic Resources Corporation is the third installment in our series on e-discovery pitfalls.

Phoenix Four (Phoenix), an investment firm, sued Strategic Resources Corp. (SRC), its investment advisor, for breach of fiduciary duty, common law fraud, and negligent misrepresentation. Phoenix was SRC’s sole client. Class, what happens when your only client sues you? Right, you go out of business.

In April or May 2004, Phoenix stopped paying fees to SRC and SRC ceased operations shortly thereafter. Between August and October 2004, SRC delivered to Phoenix and its representatives all paper records that belonged to it. Between August and September 2004, SRC transferred all of Phoenix’s electronic accounting records to Phoenix’s designated accounting representatives.

(citations omitted).

As the revenue stopped coming in, SRC found itself unable to pay the rent.

Sometime in February or March 2005, SRC’s landlord commenced proceedings to evict SRC from its offices in Carnegie Hall Towers, New York. SRC vacated its office space on or about March 31, 2005, prior to the commencement of this lawsuit. When the SRC Defendants moved out of Carnegie Hall Towers, they left behind Phoenix marketing documents, old prospectuses, and trade publications. They also left behind at least ten computer workstations. SRC’s landlord subsequently disposed of the abandoned documents and computers. [SRC co-founder Paul] Schack did not recall discussing with Van Pelt, Hopkins, or anyone else whether the workstations contained Phoenix-related material prior to abandoning them. By that time, SRC’s technical specialist had already left SRC’s employ.

(citations omitted, emphasis added).

Okay, here is the first real trouble with discovery, although it would be wrong to say that trouble (with a capital “T”) hadn’t already arrived. Obviously, just leaving workstations containing potentially relevant material to a lawsuit after you’ve realized you’re about to be sued is a bad idea. The court thinks so too, but we’ll get to that. What happens next?

The SRC Defendants took with them from Carnegie Hall Towers about fifty boxes containing business records pertaining to SRC and Phoenix, two servers, and at least two computer workstations. Schack, who subsequently started a new business venture, housed these items in his new office and used at least one of the servers in his new business.

Okay, so now we have the old equipment residing in a new business. In May, Phoenix files its complaint. The judge picks up the tale.

Prior to and immediately following receipt of Phoenix’s first set of document demands in August 2005, Mound Cotton, counsel to the SRC Defendants, discussed with them the need to locate and gather pertinent paper and electronic documents. Schack and Hopkins searched the computer system in Schack’s new office and informed Mound Cotton that they had failed to locate any electronic files or folders that pertained to Phoenix or SRC. They did not search the servers, however, as Schack was unaware that there was any pertinent information on them. The SRC Defendants also advised Mound Cotton that “because SRC was no longer in operation, there were no computers or electronic document collections to look through or search.” Mound Cotton attorneys reviewed hard copy materials made available by the SRC Defendants and subsequently produced these documents, about fifty boxes in all, to Phoenix in December 2005.

Basic question: if you didn’t search the servers, how did you know they didn’t contain pertinent information?

Around late February or early March 2006, a freelance computer technician, Peter Pinti, made a service call to Schack’s office in response to complaints about a malfunctioning server. This server was one of the two that the SRC Defendants had taken with them from SRC’s Carnegie Hall Towers office. After directly accessing the hard drive on the server, Pinti discovered about 25 gigabytes of data-as much as 2500 boxes-stored in a dormant, partitioned section of the server. The computer system in Schack’s office was configured in such a way that the desktop workstations did not have a “drive mapping” to that partitioned section of the hard drive. In other words, “someone using a computer connected to that server could not ‘view’ or gain access to that section of the hard drive and would have no way of knowing of its existence.” Schack immediately contacted his attorneys and was instructed to download the information and deliver it to them. A few days later, Schack asked Pinti to back up the data. Pinti first downloaded the data onto DLT tapes but Mound Cotton’s technology vendor was unable to extract the data from the tapes. On March 13 or 14, Pinti again downloaded the data onto DVDs. The deadline for discovery set in the pre-trial scheduling order for this case was March 12, 2006. See Dkt. 27.

(citation omitted).

Well, I guess we can hope that the data isn’t “pertinent.” Now this is interesting, the judge calls the unmapped partition dormant and even comes close to calling it “inaccessible” above. In fact, he later concludes that the partition fits the definition of “not reasonably accessible.” Read this:

The Introduction to the proposed amendments to Rule 26(b)(2) identifies as a difficult-to-access source “legacy data that remains from obsolete systems and is unintelligible on the successor systems.” Pending Rules Amendments, http://www.uscourts.gov/rules/newrules6.html. at 40. The information on the server in this case, which is in a partitioned section of the hard drive and not accessible from Schack’s newly configured computer system, fits squarely within this description.

Bull! An unmapped partition is easily accessible. But the point is, Phoenix’s counsel could not have adequately explained this. This conclusion was something in the nature of a mitigating factor. So whatever the penalty, keep in mind that it could be worse. This also illustrates the need for network topology maps and standardized procedures for storing data. Lay on, MacDuff!

Mound Cotton received the DVDs on March 15, 2006, and tried to review the documents quickly for privilege, relevance, and responsiveness. On March 20, 2006, Mound Cotton alerted Phoenix to the recently discovered documents and advised that it would inform Phoenix of the nature of the documents “as soon as [it] knew more about [them].” Between March 20 and April 10, 2006, counsel for Phoenix and the SRC Defendants met almost daily at depositions being taken in the case and discussed the status of the production. They also corresponded about the production. On April 10, 2006, SRC responded to Phoenix’s prior discovery requests that all responsive documents had been produced. On April 12, 2006, Mound Cotton informed Phoenix that it would produce the documents in “TIFF” format but Phoenix rejected that format. On April 13, 2006, Mound Cotton told Phoenix that it would provide the documents in an electronically searchable “Case Vault” format. Phoenix did not respond to this offer.

(citations omitted).

Evidently, hoping didn’t work. Phoenix goes on to be so uncooperative as to seek sanctions against SRC. The court decides against issuing an adverse inference instruction to the jury, both for the abandonment of the workstations and the late production of the unmapped partition. About the abandonment, the court says:

Nonetheless, because actual notices of the pending litigations are unavailable, and because of the upheaval in the defendants’ business, I do not find this instance to be one in which gross negligence alone supports an inference that the abandoned evidence was unfavorable to the SRC Defendants.

The court was not so forgiving with respect to the manner in which Mound Cotton (SRC’s counsel) conducted its search for relevant documents:

It appears that Mound Cotton never undertook the more methodical survey of the SRC Defendants’ sources of information that Judge Scheindlin outlined in Zubulake V. Mound Cotton simply accepted the defendants’ representation that, because SRC was no longer in operation, there were no computers or electronic collections to search. Had Mound Cotton been diligent, it might have asked-as it should have-what had happened to the computers SRC used at Carnegie Hall Towers.

It also wasn’t happy with SRC’s investigation. Ultimately, the court decides against any of the more stronger remedies available, and instead fines client and counsel $30,000 each. That had to be a shock for counsel, and an unwelcomed occurrence for SRC. All because of a store of invisible data, that was not to be found on any mapped partition…

Phoenix Four, Inc. v. Strategic Resources Corp., 2006 WL 1409413 (S.D.N.Y. May 23, 2006).

Are back-up tapes inhererently inaccessible for purposes of e-discovery?

Data may be considered not reasonably accessible by reasons of hardware limitations. In general, litigation holds do not apply to inaccessible back-up tapes. Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308, *2 (citing Zubulake IV, 220 F.R.D. at 218). Are all back up tapes inaccessible, by definition? The opinion in Alcoa stated that “accessible” back-up tapes should probably be included in any litigation hold. Id. From this perspective, then, back up tapes are not inherently inaccessible, but are merely presumptively so. What differentiates “accessible” back up tapes from tapes that are “inaccessible?” Active and frequent use of the tapes is apparently the key. Zubulake IV, 220 F.R.D. at 218 (stating that if backup tapes are accessible (i.e., actively used for information retrieval), then such tapes would likely be subject to the litigation hold.”). Another court ruled that:

[D]ata that is accessible is stored in a readily usable format that does [not?] need to be restored or otherwise manipulated to be usable. Conversely, data that is inaccessible is not readily useable and must be restored to an accessible state before the data is usable. Backup tapes are considered an inaccessible format, and, thus, shifting the costs of producing data from backup tapes may be considered.

Quinby v. WESTLB AG, No. 04Civ.7406(WHP)(HBP), 2006 WL 2597900, at *7 (S.D.N.Y. Sep. 5, 2006) (citing Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309, 320 (S.D.N.Y.2003)).

One school district’s e-discovery challenge

Education Week has an article detailing one school district’s response to the challenges posed by law suits and data management:

[The district's network manager] spent his days putting an electronic archiving system in place in response to revised rules from the U.S. Supreme Court regarding federal lawsuits. The rules, updated in December 2006, require companies, government agencies, school districts, and generally any organization that might be sued in federal court to have systems for retrieving electronic data such as e-mail correspondence if it is needed as evidence in a federal case.

That means districts need to develop policies and software systems for the storage of e-mail, instant messages, word processing documents, PowerPoint presentations, and any type of electronic file on a computer system. The new requirements have caught many districts by surprise, and school officials are now playing catch-up to adopt policies and make sure they have the needed software.

One driving force behind the district’s move was to “avoid an IT nightmare”:

“If you’re called upon to produce information on backup tapes, and you have to restore every set of backup tapes, that’s an IT nightmare,” says Michael Ivanov, the senior director of archiving at CommVault, an Oceanport, N.J.-based information-management company that provides e-mail archiving services, and whose clients include the Middletown district and the 20,000-student Moore, Okla., schools.

One Miami-based lawyer warns those districts who have not moved to shore up their own procedures and IT infrastructure:

While some districts, particularly smaller ones, may believe they don’t need to worry about the new rules that pertain to federal lawsuits, Lindsay, the Miami-based lawyer, says they should think again because state procedures typically take their cues from the federal courts. It’s only a matter of time, he says, before states begin adopting similar requirements regarding electronic content and lawsuits.

“The states haven’t adopted similar rules regarding electronic discovery yet, but they will,” he warns. “They all will.”

Changes to the FRCP were made to reflect changes in society, so state laws, if they haven’t already, will have to do likewise. These rules may not be identical to the Federal rules, but no court is going accept excuses in the place of competent execution of policies and implementation of appropriate technology.

DataKos discusses e-mail tape backup and rotation schedules

In this post, DataKos looks for a silver bullet formula for tape storage and backup rotations:

Backup tapes should be used only for disaster recovery, but many organizations still use those media for archives, retention or storage, with a trend toward increased use of archive storage technologies. Archiving does not solve the information lifecycle challenges organizations face and the more information retained the more that is subject to collateral legal disclovery.

Another item to note: the more often you use tapes for archiving and restoring, the less likely a court will find those tapes “not reasonably accessible” for purposes of discovery. If you only restore in times of disaster or error, you will greatly decrease the chances of having to do costly and burdensome restore operations once litigation strikes.