Q&A: Discovery in disputes
October 2014 | SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION
Financier Worldwide Magazine
FW moderates a discussion on discovery in disputes between Bennett B. Borden at Drinker Biddle & Reath LLP, Jason Coyne at IT Group and Shannon Capone Kirk at Ropes & Gray LLP.
FW: Could you outline the importance of the discovery phase in building a case to resolve a dispute? In your opinion, do parties pay sufficient attention to this process?
Borden: The discovery phase is the most critical in resolving a dispute because in this phase a party identifies and gathers evidence of its position. And once a party’s position is known, the case will resolve quickly. Litigation is fundamentally about answering the questions of what happened and why. The answer to those questions is largely found within electronic information. A company carries out its business through the actions and decisions of its management and employees. In the information age, those actions and decisions are evidenced and effectuated largely through electronic means. With the volume and variety of electronic information, we have a greater granularity of evidence than ever before. This means that we can answer the questions of what happened and why much more quickly and with much greater certainty. This allows a party to know with virtual certainty what its position is in the litigation. There are only three possible positions: it is liable, it isn’t liable, or it is a toss-up – and very rarely is it a toss-up. Knowing your position is very powerful in litigation, especially when you know it before the opposition does. Despite this critical importance of the discovery phase, parties rarely give it the attention it warrants.
Coyne: The nature of discovery is of course to reveal, or confirm, facts. However, parties will often focus on the material they desire to see from their opponent, or the facts they believe to be true. This may result in a lack of information which could potentially ruin the party’s case, as they will not have had a chance to consider a defence. Early discovery of information is vital if parties wish to develop a thorough case.
Kirk: E-discovery is the same as traditional discovery: it is the phase in which parties exchange information about their respective claims and defences. In other words, the discovery phase is the very phase in which parties evaluate the strength of each other’s case. Oftentimes, disputes are resolved in settlement, either during or close after the discovery phase, based upon information uncovered – or not uncovered – during the discovery phase. In my opinion, parties do pay a significant amount of attention to the discovery phase, as in most instances, the discovery phase generates the bulk of the litigation spend and also because so much attention is given to this phase by the courts, by way of orders of sanctions for failure to comply with discovery requirements. Parties could more cost-effectively and more quickly address discovery, and thus build stronger cases and defences, if strategic thought were given up front to the data sources and review tool and review approach to take with any given dispute.
FW: To what extent can the discovery phase be used to evaluate the arguments a plaintiff is likely to use, and pre-empt the course a dispute is likely to take?
Coyne: Discovery typically identifies additional litigation risks which need to be dealt with. Internal discussions relating to historic emails about a problematic client can often be simply careless when there is no fear of litigation. However, when these are visited years later and need to be offered up to the counterparty as part of the discovery process, the potential ramifications can be significant. Insights into the technical infrastructure of your counterparty – such a CRM systems, bug tracking systems, and so on – can often be helpful when confirming what information stores you wish to be searched for relevant material.
Kirk: It is possible during the discovery phase to pre-empt certain arguments. For example, perhaps the plaintiff wishes to argue that the defendant stole certain of the plaintiff’s customers. If the defendant can produce emails showing how the plaintiff referred those customers to the defendant, then that would likely pre-empt such an argument. Another example is if the plaintiff appears poised to argue that the defendant failed to preserve certain electronic evidence. If the defendant is able to show through discovery that the plaintiff also failed to preserve certain electronic evidence, it is possible that an agreement can be struck that both parties will not pursue such claims. Really, there is an untold number of examples of how discovery – the very phase in which information is exchanged by way of document production, answers to interrogatories, and depositions, as some examples – could alter the course of a dispute.
Borden: Typically, a plaintiff’s arguments are fairly predictable. Causes of action have elements the plaintiff must prove and these can be investigated during the fact development stage of discovery. One consequence of having so much electronic information is that it is virtually impossible for an important action or decision to occur within a company without some electronic evidence left behind. This provides us with more detailed evidence of what occurred. It is like the difference between a 1-megapixel and 10-megapixel picture. The latter is more clear and detailed because it contains more points of illumination. This allows us not only to prove what happened, but, perhaps more importantly, what did not. Defending against litigation or a regulatory investigation is often an exercise in proving a negative. This is much easier to do in the information age. Strategically, this allows for a much more aggressive defence.
FW: What steps can parties take to control costs during the discovery phase? How can they balance cutting costs with undertaking sufficient discovery?
Kirk: Parties can take a number of steps to control costs during the discovery phase. Taking these steps contemplates the need for sufficient discovery; in other words, it is a fallacy that widespread, scorched earth discovery is needed to ensure ‘sufficient’ discovery. Strategic decisions can be made to narrow the scope of discovery early on in a matter in order to cut costs. Practically speaking, the most effective way to cut costs in discovery is to control the number of custodians for whom the party preserves, collects and reviews data. Being that processing, hosting and review costs are typically generated based on gig size, the less gigs collected – that is, fewer custodians or less data per custodian – the lower the discovery cost. Usually, there is a core set of custodians for whom data exists that is both relevant and unique; agreements should be reached on whom should be in that group. Another way to control costs is to actively and knowingly manage the e-discovery vendor. It is far too easy to rack up e-discovery vendor fees if one is not mindful of how and when they charge for data.
Borden: The costs of discovery are largely driven by volume. If you want to reduce the cost, reduce the volume of information to be analysed. This can be done in two primary ways. First, be smart about the data you target for collection and review. While there may be a great deal of information relevant to a litigation, not all of it is equally important to the ultimate resolution. Often parties will take a ‘bottom up’ approach to discovery. They will collect very broadly from a large number of custodians and then undertake multiple levels of review to slowly cull down the volume to the most relevant 1-2 percent that actually has a significant impact on the case. This is precisely the opposite of how one should approach discovery. The ‘top down’ approach narrowly targets information from the most important custodians and the most likely relevant sources – almost always email – and then expands from there as necessary and, more importantly, as directed by the information already obtained. By taking small iterative steps in collecting and analysing information, a party can exponentially reduce the cost and burden of discovery and get to an ultimate resolution much faster. This requires a great deal of strategic thinking at the beginning of a case to gain an understanding of who the key players are, what sources of information they have access to, and how difficult it is to access and assess them.
Coyne: Cost control is a major factor and we typically see parties entering into agreements with e-discovery providers based on a ‘per gigabyte’ or ‘per page’ pricing structure. Whilst this can often suit disputes where the precise number of documents is known at the outset, our experience is that the volume of documents – from both parties – will balloon during the course of the litigation. Often it will be more cost effective to select an e-discovery service with a fixed cost. Generally, the more information about the nature, size and whereabouts of the electronic documents at the outset, the easier it is to provide an accurate cost for e-discovery services and estimates of the time and people needed to search, review and disclose the documents.
FW: Parties are continually seeking to strike a balance between the need for adequate discovery and the need to protect against unnecessary access to sensitive information. What steps can be taken to limit discovery?
Borden: The key to limiting discovery is to take advantage of the proportionality principle. In the US, this principle is in Federal Rule of Civil Procedure 26, which defines the scope of and limits to discovery. But we have found any tribunal, even in arbitration, can be persuaded by properly framed and supported proportionality arguments. Proportionality is a balancing test between the benefit and burden of any particular source or piece of information. Parties take advantage of this limitation by providing evidence on both sides of the balancing test. This is important because many times parties will focus on the burden and present no evidence regarding the potential benefit, leaving the decision-maker with no basis on which to rule in their favour. The most common and effective way to present proportionality evidence is through statistically valid random sampling to show that a particular source – or custodian or search term, for example – contains a small amount of relevant information and laying out the costs of identifying, collecting, reviewing and producing that information. Courts often are heavily swayed when this evidence is properly marshalled and presented.
Kirk: First, the need to protect sensitive information can be tackled by reducing the number of custodians reviewed and thus reducing the risk of disclosure of sensitive information. Further, using advanced technology review tools adds protection in how data is reviewed, and the issues and themes seen therein. Beyond these steps, the traditional method of a protective agreement or order should be employed when sensitive information is at issue. If truly sensitive, it is best to obtain an agreement that the data is ‘attorneys eyes only’, thus limiting the exposure of the data to only opposing counsel. Indeed, some data sources are conducive to inspection as opposed to copying for production, and if that is possible and it reduces dissemination outside of the party’s control, then that too could be explored.
Coyne: Lawyers will advise, prior to the exchange documents, on points of relevance and privilege, but from a technical standpoint it is important to ensure that data is ‘secured’ from potential loss or inadvertent deletion. Parties often find that data which was initially thought to be ‘irrelevant’ becomes critical later. It is better to take fully encrypted forensic images of data stores at the outset, because these contain all of the original metadata and can be revisited at any time throughout the litigation. Further practical steps can include limiting the custodians, excluding personal data and isolating sensitive documents for independent third party review only.
FW: In circumstances where opponents wish to avoid disclosing unfavourable information, what measures can be put in place to enforce discovery requests?
Kirk: Unfortunately, in litigation it is not always possible to avoid the production of unfavourable information. If the information is relevant and not privileged or protected as work product, it must be produced. If the information is ‘sensitive’ – containing sensitive personal information protected by data protection laws or trade secrets – then careful steps should be taken.
Borden: Opposing parties try to withhold information either by claiming it is sensitive or it doesn’t exist. Claims regarding sensitivity can be dealt with using proper confidentiality orders. When the opposing party claims there is no such information, the task becomes a bit harder because the burden of proof to compel production falls on the requesting party. Most usually this is done by showing that the information does exist – or did at one point – because some evidence of it is in the hands of the producing party. For example, if the requesting party has an email from the producing party, that is evidence that the email once existed, which can support a motion to compel. The requesting party can also attack the method or thoroughness of the producing party’s search methods or technologies. Motion practice can be distracting and expensive, however. It is often more effective to get the discovery you seek by entering into comprehensive negotiations to establish a protocol regarding what sources of data are to be searched and how.
Coyne: It is possible to utilise forensic strategies within e-discovery tools to assist in the unearthing of missing documents from email chains or even additional document versions utilised in a negotiation drafting exercise.
FW: E-discovery is being utilised as an efficient and cost effective means of accessing documents to support a case. What other advantages does e-discovery have over traditional discovery methods, and what new challenges does it pose?
Coyne: The process of ‘standardised’ electronic exchange has simplified the document handover process, allowing all parties – even in complex multi-party cases – to be reviewing the other parties’ entire disclosure within minutes of exchange. Exchanged document sets can be viewed separately or together to help identify missing documents, such as replies or internal ‘forwards’ of initial emails. There are, however, many challenges. Electronic documents often have vast amounts of metadata contained within the electronic file. A review of this data may reveal earlier drafting comments, suggested edits, names of the creators and reviewers and the geographic location where it was created. Documents attached to emails raise further questions. For example, is the body of an email in which the attachment is to be disclosed, also to be disclosed? Alternatively, if the attachment of an email is relevant, but privileged, does the body of the email automatically take on the privileged status? In strict technical terms, the body of an email and its attachments are within the same file. Modification of the electronic file will likely be required to split these entities to disclose one but not the other.
Borden: In the information age, virtually all discovery is electronic. An attorney who is not conversant in electronic discovery, either personally or through association, borders on committing malpractice and is certainly sacrificing great advantage for his or her client. It is impossible to marshal the evidence contained within the vast volume of a company’s electronic information without employing electronic means to do so. And, the technology available to analyse this information is nothing short of miraculous. We use machine-learning and predictive technologies to find patterns in vast quantities of information that simply is not possible by human review. And the speed at which these patterns and other evidence can be developed is truly astonishing. Even a few years ago, getting through a million documents took months and dozens of attorneys. Today, a small team of fact developers can do the same in a week. The volume and variety of information in this age certainly presents challenges. It requires us to know more about how information is created, used, stored, accessed and analysed. But lawyers deal with facts, and facts reside within electronic information. We cannot claim we deal with facts and then not be skilled in where they live or how to get at them. A lawyer who is skilled at getting at and marshalling facts in the information age is a truly powerful advocate.
Kirk: It is incorrect to think of e-discovery as a new means employed in cases. E-discovery is the same as traditional discovery: it is the phase in which parties exchange information about their respective claims and defences. E-discovery simply means that discovery now includes electronic data, such as laptops, email, IM, text, chat, social media, databases, servers, log data, knowledge sharing platforms, and so on. The advantage of e-discovery is that there seems to be far more evidence generated in support or defence of claims: everything is written somewhere these days, whereas, in paper discovery days, not much was written, at least in comparison to today’s climate. The challenges are, of course, the increased cost, the challenge of exposure of sensitive and privileged information – which is harder to control given the volume that is required to review – and the risk that something truly embarrassing is written that didn’t need to be written – a plethora of examples is found in emails and IM’s of party employees in any number of litigations and investigations.
FW: What final advice can you offer to firms on managing the discovery phase of a dispute? How can they increase efficiency while building the best possible case?
Borden: My best advice for firms is to understand the power and advantage that comes with being truly adept at leveraging electronic information and to invest in the people and technology that can help them become so. Leveraging electronic information is not merely helpful in discovery and litigation, but in every other aspect of law such as mergers and acquisitions, corporate governance, regulatory compliance, investments, insurance and many others. The world is undergoing significant technological advancement. As with any prior advancing age, the companies and firms that take advantage of these advancements will simply do better than those that do not. Law firms are under increasing pressure to be more efficient and technology is the way to do so. Embrace this technology and you will excel, do not and you will become irrelevant.
Kirk: Firms should think early about the strategy of discovery and not simply delegate discovery to the most junior member of the team to churn through millions of emails without good thought as to custodian scope, without managing the e-discovery vendor and understanding when and how charges are accrued, without strategically considering how the review tool could categorise and prioritise documents, and without seeking fair boundaries on discovery scope with the opposing party.
Coyne: Obtain the full forensic image of the data stores. It is better to go back and delete the information that you have taken, but do not need, rather than attempt to rebuild missing data that was not captured adequately. A full forensic image will allow the opportunity to attempt the recovery of deleted material from the data stores. For successful e-discovery at this stage, good preparation is critical to understand the scope of the case in order to increase efficiency and to control cost.
Bennett B. Borden is a globally recognised authority on the legal, technological and policy implications of information. Mr Borden has focused his career on helping clients use the power of information governance to drive strategic outcomes, reduce e-discovery costs, and improve business operations. Beginning with his work in the intelligence community, and continuing to his current position, Mr Borden utilises advanced technology to address voluminous electronic information to provide evidence in litigation, investigations, due diligence and for market intelligence. He can be contacted on +1 (202) 230 5194 or by email: email@example.com.
Jason Coyne has over 25 years’ of experience in Information Technology and has been instructed by many of the leading firms of solicitors. He has provided oral evidence in courts and arbitrations in the UK, UAE, Europe and South Africa in disputes arising from technology outsourcing, software development, electronic copyright and computer usage investigations. He has been an expert witness in numerous disputes involving Trade Secrets over the past 15 years and heads up IT Group’s forensic investigations and e-discovery teams. He can be contacted on +44 (0)845 226 0331 or by email: firstname.lastname@example.org.
Shannon Capone Kirk is E-Discovery Counsel at Ropes & Gray where she focuses exclusively on electronic discovery law. Ms Kirk is a contributing author on two books on e-discovery and has published numerous articles on the topic in publications such as: Law Technology News, Corporate Legal Times, National Law Journal, Sue Magazine. Ms Kirk also conducts CLE courses for attorneys and routinely speaks on e-discovery. She is a member of Suffolk Law School’s faculty, teaching e-discovery law. She can be contacted on +1 (617) 951 7218 or by email: email@example.com.
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