three e-discovery principles for insurers

8/14/2019 Three E-Discovery Principles for Insurers

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THREE E-DISCOVERYPRINCIPLES FOR INSURERS

Brian S. Jones


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DATA CAPACITY IS EXPLODING

7,235 Exabytes


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1 exabyte = 1,024 petabytes

1 petabyte = 1,024 terabytes1 terabyte = 1,024 gigabytes

1 gigabyte = 1,024 megabytes

1,099,511,627,776megabytes


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By 2017:

2,651,655,542,319,787pictures


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E-DISCOVERY COSTS ARE GROWING


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TEN YEARS AGO


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ZUBULAKE V. UBS WARBURG, LLC

First landmark e-discovery opinion

Gender discrimination case

Zubulake: info needed to provecase was on UBS's computers andbackup tapes

Court ordered restoration of

backup tapes and split costsbetween parties

Certain backup tapes and emails

were "missing"


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Two questions:

When does the duty attach?

What must be preserved?

"The obligation to preserve evidence ariseswhen the party has notice that the evidence

is relevant to litigation or when a partyshould have known that the evidence may

be relevant to future litigation."


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But...

If a company can identify whereparticular employee documents arestored on backup tapes, then the tapes

storing the documents of key playersto the existing or threatened litigationshould be preserved if the informationcontained on those tapes is nototherwise available. This exceptionapplies to all backup tapes.


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UBS's destruction of backup tapes wasnegligent, not willful

Court denied giving adverse inferenceinstruction because Zubulake couldn'tshow that lost evidence would havesupported her claims


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SEVEN YEARS LATER

"Zubulake Revisited"

--Pension Comm. of Univ. of Montreal Pension Plan v. Banc ofAm. Sec., 685 F. Supp.2d 456 (S.D.N.Y. 2010)

"By now, it should be abundantly clear thatthe duty to preserve means what it says and

that a failure to preserve recordspaper orelectronicand to search in the right placesfor those records, will inevitably result in the

spoliation of evidence."


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RULES CHANGE;

PRINCIPLES DONTUSUALLY


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THREE PRINCIPLES

Preservation

Protection

Production


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DUTY TO PRESERVESEVENTH CIRCUIT:

Duty to preserve is triggered when the party "knew or should haveknown that litigation was imminent"

--Trask-Morton v. Motel 6 Operating L.P., 534 F.3d 672 (7th Cir.

2000)

SECOND CIRCUIT:

"The obligation to preserve evidence arises when [a] party has

notice that the evidence is relevant to litigation or when a partyshould have known that the evidence may be relevantto future

litigation.

--Fujitsu Ltd. v. Fed. Exp. Corp., 247 F.3d 423 (2d Cir. 2001).


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WHAT TO AVOID


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ALLSTATE TEXAS LLOYD'S V. MCKINNEY

Insured's housedestroyed by fire

Fire marshall: faultybreakers

Allstate: Nope, itwas arson


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Allstate destroyed fire samples and communicationsabout those samples; senior adjuster ordered

destruction

Insured's claim was open

Allstate knew insured had a lawyer

Allstate has asserted work-product protection

for documents that pre-dated the destroyedcommunications

Testimony about samples was excluded


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WHAT TO DO


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LITIGATION HOLDS


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SHOULD BE:

INSTRUCTIVE:You do/don't this

Here's who to ask if have any questions

BROAD:

Go to all potential custodians

Third-party providers, agents*, everyone in IT

SENSITIVE:

Issued when appears litigation might arise from a claim

Look at grounds for denial


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Haskins v. First Am. Title Ins. Co., 2012 WL5183908 (D. N.J. Oct. 18, 2012):

Insurer had duty to issue a litigation hold to itsindependent agents because, even though

the documents themselves were in the possession ofthe agents, the insurer had a legal right to them, so

they were under the insurers care, custody,or control.


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WRITTEN DOCUMENTRETENTION POLICY


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RULE 37(E)

Absent exceptional circumstances, a court may notimpose sanctions under these rules on a party for

failing to provide electronically stored informationlost as a result of the routine, good-faith operation ofan electronic information system.

No sanctions for destruction of ESI before knew orshould have known of litigation


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OTHER TIPS

Keep Document Retention Policy updated

Readily available to all employees (and

outside counsel)

Make sure IT applies policy uniformly

Designate someone to be representativewitness on retention policies and informationstorage and retrieval capabilities


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PROTECTION


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Attorney-Client Privilege

Work Product

Trade Secrets

Confidential and ProprietaryInformation


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RULE 502(b) INADVERTENT DISCLOSURE. When made in a federal proceeding or to a federal office oragency, the disclosure does not operate as a waiver in a federal or state proceeding if:

(1) the disclosure is inadvertent;

(2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and

(3) the holder promptly took reasonable steps to rectify the error, including (if applicable)following Federal Rule of CivilProcedure 26(b)(5)(B).

(c) DISCLOSURE MADE IN A STATE PROCEEDING. When the disclosure is made in a stateproceeding and is not the subject of a state-court order concerning waiver, the disclosure does notoperate as a waiver in a federal proceeding if the disclosure:

(1) would not be a waiver under this rule if it had been made in a federal proceeding; or

(2) is not a waiver under the law of the state where the disclosure occurred.

(d) CONTROLLING EFFECT OF A COURT ORDER. A federal court may order that the privilege orprotection is not waived by disclosure connected with the litigation pending before the courtin whichevent the disclosure is also not a waiver in any other federal or state proceeding.

(e) CONTROLLING EFFECT OF A PARTY AGREEMENT. An agreement on the effect of disclosure in afederal proceeding is binding only on the parties to the agreement, unless it is incorporated into a

court order.


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502(D) ORDERS

SHOULD BE A PART OF EVERY INSURER'S PRACTICES

Drafting tips:

State that order applies to information protected by the attorney-client privilege, work-product doctrine, or any other privilege in thecase and in any other federal or state proceeding or arbitrations

Disclaim Rule 502(B)'s applicability

Disclosure doesn't have to be inadvertent

Don't have to take measures to prevent or rectify disclosure

Refer to other confidentiality agreements/protective orders, if any


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502(D) ORDERS

More drafting tips:

Contain "clawback" language requiring

return or deletion of documents andprohibiting use in any form while preservingright to challenge privilege asserted

Apply order to information alreadyproduced


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PRODUCTION


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How the process ends should be

discussed at the very beginning.


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BEFORE THE 26(F) CONFERENCE

Early discussion with outside counsel and IT

Early identification of key IT witnesses

What kinds of ESI exist?

How ESI is maintained?

How can ESI be produced?

What forms of ESI do we need to receive?


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RULE 26(F)(3)

(C) any issues about disclosure or discovery ofelectronically stored information, including theform or forms in which it should be produced;

(D) any issues about claims of privilege or ofprotection as trial-preparation materials, including

if the parties agree on a procedure to assertthese claims after productionwhether to ask thecourt to include their agreement in an order;


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RULE 34(B)(2)

(E) Producing the Documents or Electronically Stored Information.Unless otherwise stipulated or ordered by the court, these proceduresapply to producing documents or electronically stored information:

(i) A party must produce documents as they are kept in the usualcourse of business or must organize and label them to correspond tothe categories in the request;

(ii) If a request does not specify a form for producing electronicallystored information, a party must produce it in a form or forms in

which it is ordinarily maintained or in a reasonably usable form orforms; and

(iii) A party need not produce the same electronically storedinformation in more than one form.


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CASE MANAGEMENT PLANS

Best places to set out forms ofproduction

Some courts requiring ESI

language in CMPs

SeeSeventh Circuit E-DiscoveryPrinciples

E-discovery liasons

Cost-sharing discussions


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Initial universe of 19.5 million documents

Keyword culling trimmed that to 3.9 milliondocuments (1.5 terabytes).

De-duping cut that to 2.5 million.

Using statistical sampling, 99% confidence that

.55% to 1.33% of unselected documents wouldbe responsive;1.37% to 2.47% of the original19.5 million were responsive.


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Under predictive coding, the software learns a userspreferences or goals; as it learns, the software identifieswith greater accuracy just which items the user wants,whether it be a song, a product, or a search topic.Biomet used a predictive coding service called Axelerateand eight contract attorneys to review a sampling of the2.5 million documents. After one round of find more likethis interaction between the attorneys and the software,the contract attorneys (together with other softwarerecommended by Biomets e-discovery vendor) revieweddocuments for relevancy, confidentiality, and privilege.

$1 07 million in e-discovery costs; $3 25 million more expected


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$1.07 million in e-discovery costs; $3.25 million more expected

Plaintiffs Steering Committee felt initial keyword culling tainted theprocess; wanted Biomet to use predictive coding on the original 19.5

million documents

Court approved Biomets e-discovery procedures:

What Biomet has done complies fully with the requirements of Federal

Rules of Civil ProcedureIt might well be that predictive coding, insteadof a keyword search, at Stage Two of the process would unearthadditional relevant documents. But it would cost Biomet a million, ormillions, of dollars to test the Steering Committees theory thatpredictive coding would produce a significantly greater number ofrelevant documents. Even in light of the needs of the hundreds ofplaintiffs in this case, the very large amount in controversy, the partiesresources, the importance of the issues at stake, and the importance ofthis discovery in resolving the issues, I cant find that the likely benefitsof the discovery proposed by the Steering Committee equals oroutweighs its additional burden on, and additional expense to, Biomet.


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Technology quickly replacing traditionaldocument review procedures

Expensive, but can result in significant costsavings in large cases


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SUGGESTED READING

Indianapolis Friendsof E-Discovery


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