Washington, D.C. ~ November 7-9, 2007

2007 International 2007 International ConferenceConference

The Devil is in the The Devil is in the E-Mails: E-Mails:

E-Discovery, EGAD!E-Discovery, EGAD!

The Devil is in the Emails

Panel Members• MODERATOR: Sarah Goldstein,

Partner Lewis, Brisbois, Bisgaard & Smith LLP

• James Gordon, Managing DirectorNavigant Consulting, Inc.

• Thomas M. Jones, Vice ChairElectronic Discovery Practice Area, Cozen

O’Connor

• Katy Kelly Lewis, Vice PresidentAmWINS Insurance Brokerage of California

Employment Practices Liability

Hypothetical• Electra Ronick, is a claims adjuster for

EML Insurance Company. She is on a team with four younger, male adjustors.

• At Electra’s annual review, she was not given a salary increase. In fact, because of her substandard performance, her supervisor, Dick Avery, put her on a 90 day performance improvement plan.

Employment Practices Liability

Hypothetical• During these 90 days, Electra searched

through EML’s computer records for data and information. She also searched Dick’s desk. She found and copied a printout of data with comparative salary, age and gender information for each of the adjustors.

• At the end of the 90 days, Electra was terminated for not meeting the expectations of the performance improvement plan. Armed with company records & information from Dick’s desk, Electra filed a claim with the EEOC.

Tabulator Question # 1

When does the electronically stored information preservation obligation arise?

A. At the time Electra is put on the performance improvement plan

B. At the time of filing of her charge of discrimination

And the survey said…

Directors and Officers Liability

Hypothetical• Original Mortgage Group ("OMG") provides

debt-financing options to other lending institutions in the origination and subsequent collateralization and sale of loans in the commercial and residential real estate market.

• OMG's business model focuses on commercial and residential paper with adjustable rates for the Alt A and sub-prime markets. Since its founding in 2003, OMG has consistently issued glowing financial reports, and its stock price has risen exponentially.

Directors and Officers Liability

Hypothetical• OMG has been the favorite of the ratings

agencies, which previously rated OMG's portfolio AAA or slightly below. OMG's stock has frequently been referred to as a "high-flyer" by numerous market analysts and TV commentators. OMG's business model included selling off as Collateralized Mortgage Obligations ("CMOs") reportedly more than 85% of its portfolio.

Directors and Officers Liability

Hypothetical• In August 2007, OMG announced that

many of its loans and investments had become materially impaired.

• Ten days later, OMG announced that losses associated with its operations could exceed the company's assets.

• Last month, OMG announced that it has received margin calls from its lenders in excess of $400MM and that the company has no liquidity to meet those obligations.

Directors and Officers Liability

Hypothetical• OMG's stock price has plunged more

than 85% in the last 30 days, and the company is on the verge of being de-listed from the NYSE.

• Numerous securities fraud lawsuits have been filed against OMG, its officers and directors.

Directors and Officers Liability

Hypothetical• OMG has formed a special committee

to conduct an internal investigation on behalf of the Board in reference to its past accounting practices.

• A former employee from the accounting department now works as a consultant to one of the Plaintiff class action law firms and has identified more than 70 "custodians" who would have relevant ESI.

Tabulator Question # 2

OMG’s counsel recommended that OMG file a cost-shifting motion if the court requires OMG to search backup tapes for relevant emails.

A cost-shifting motion is appropriate under the circumstances.

A. TrueB. False

And the survey said…

General Liability/E&O Hypothetical

• The Pollution Free Coal Company was sued in a class action lawsuit based on its CO2 emissions, which allegedly contribute to climate change.

• Plaintiffs cite Lupus as an example of a chronic condition that often results in heightened photosensitivity, and assert that “[a]t least one member of the plaintiff class presently has that condition.”

General Liability/E&O Hypothetical

• Plaintiffs also allege that depletion of stratospheric ozone will result in greater amounts of radiation reaching the earth’s surface.

• Plaintiffs assert that such increases in radiation have “been linked to a higher incidence of certain skin cancers, ailments, such as Lupus, cataracts, suppression of the human immune system, damage to crops and aquatic organisms, and increased formation of ground-level ozone.”

Tabulator Question # 3

The Pollution Free Coal Company out-sources all of its IT work to the Evidence Eliminator Data Company.

Does the Pollution Free Coal Company have an obligation to preserve relevant data in the possession of the Evidence Eliminator Data Company?

A. YesB. No

And the survey said…

Tom’s Takeaways

• Duty to preserve ESI is triggered when litigation is filed or when litigation is probable.

• A litigation hold should be timely sent to the “key players” and the IT department.

• A responding party must produce relevant non-privileged data that is readily accessible.

• Metadata may be discoverable.• Backup tapes should be used for disaster

recovery purposes and not for archival purposes.

Tom’s Takeaways• A party’s preservation obligation applies to

home personal computers if they are also used for business.

• Cost-shifting applies only to data that is inaccessible because of undue burden or cost.

• A party can be sanctioned for destroying data that should have been preserved regardless of the requirements of a retention policy.

• Outside counsel has an obligation to monitor the litigation hold to ensure compliance.

Tom’s Takeaways

• The preservation obligation may extend to outsourced or third-party data.

• Preservation obligations may apply to foreign corporations.

• Adequately preparing for a Rule 26(f) Conference is crucial.

• A responding party must act in good faith to get safe harbor protection under Rule 37.

Katy’s Keepers

• Be prepared. Retain as thorough electronic notes as possible regarding any performance improvement plans, or other performance discussions.

• Keep your supervisors and managers updated and abreast of the most current information regarding the retention of company data and records.

Katy’s Keepers

• Although litigation hold may begin at the time of the notice of the EEOC filing, each case is unique.  If there is any reason to believe you may need to produce employee related e-mails, documents, etc. keep these items safeguarded and accessible by the appropriate parties for retrieval.

Gordon’s Golden Rules

• Preservation is Key!  The failure to preserve will result in allegations of spoliation.

• Accurately representing and VERIFYING what ESI you have and ESI you do not have is as critical as preservation.

• Representations you relied on by your client's IT team will always change during their 30(b)(6) deposition.

Gordon’s Golden Rules

• Save resources by phasing the review and production of ESI.

• The uncontrollable costs (and risks) of ESI discovery are self-inflicted and come from failures to preserve and inaccurate representations.

Many thanks to…

• Sarah Goldstein• James Gordon• Thomas Jones• Katy Kelly Lewis