Discovery process puts onus on electronic records management tools

Electronic records are now considered equivalent to paper records in the discovery process for regulatory compliance or legal cases, but new search tools are available to help.

It's a nightmare waiting to happen at many enterprises: the arrival of an order to produce documents -- and the clock is ticking.

An organization that's prepared could vindicate itself before a court of law or regulatory body with only modest expense; an organization that's not ready could find itself consumed by a costly and ultimately unsuccessful scramble to produce materials from a welter of systems with search tools that are unequal to the task.

Although companies that are wont to be on the receiving end of lawsuits, such as tobacco and pharmaceutical firms, are no strangers to the rigors of the discovery process, the advent of regulations such as the Sarbanes-Oxley and Health Insurance Portability and Accountability acts, as well as other measures, is causing a wave of concern through companies of all sizes in practically all industries. Further, amendments to the Federal Rules of Civil Procedure governing e-discovery that took effect in December 2006 mandate that electronic records be considered equivalent to paper records in the discovery process.

If that weren't enough, the tough economy is exacerbating matters. Increased regulation following the financial markets' meltdown of 2008, coupled with lawsuits to redress grievances due to job losses and broken contracts, are fueling an unwelcome e-discovery boom.

A CIO at a financial industry company, who asked to remain anonymous, saw the handwriting on the wall and built a document management system to accommodate audits by the Securities and Exchange Commission, which regulates his industry.

"We have a cost-effective system that helps us fulfill our obligation of compliance. We have the ability to produce documents," he said. Still, the executive has no illusions as to the nature of the e-discovery burden. "None of this generates a single of iota of revenue. There is no return on investment. The only way I can justify it is that the cost is less than the fines we might get if we don't do it," he said.

Although the civil procedure rule changes of 2006 included measures to discourage the use of e-discovery as a weapon with which to harass defendants, more significantly they took away from defendants the excuse that, "The computer ate my homework," according to John Bace, an analyst at Stamford, Conn.-based Gartner Inc.

"We saw this in the case of Enron and MCI Worldcom. They said their systems were too complicated for them to produce [relevant documents]," Bace said. But, he explained, the new rules regarding electronic records management have teeth. "If you can't produce ESI [electronically stored information], you are subject to the same sanctions and penalties if you had destroyed the evidence on purpose. It can be as little as a fine, a negative instruction to the jury, or being held in contempt of court."

The new rules have made themselves felt in court, according to Florinda Baldridge, director of practice support at Fulbright & Jaworski LLP, a large law firm in Dallas. "There's a lot of case law evolving around e-discovery, including how technology is used in the search for evidence," Baldridge said. No less significant, she pointed out, is the impact of the rules on enterprise IT. "The inclusion of electronic documents has increased the universe of potentially discoverable documents exponentially, while the deadlines for discovery have remained the same, creating both time and cost constraints. You have to find it and produce it in a defensible manner. You have to make a diligent effort."

Diligent effort or no, many organizations aren't ready, Bace said. "Most corporations have not had very good document hygiene. There is a toxic data dump of information. When they need to produce it, it's near impossible to do," he said.

One of the reasons many companies aren't ready is that data is stored in different places: in corporate databases, email and instant message archives, as well as voicemails -- all of which are governed by different retention policies and searchable by different tools.

"E-discovery is large and fast-growing, but it's at an early stage, with many immature components. Technology fragmentation within enterprises is remarkable," said Brian Hill, an analyst at Cambridge, Mass.-based Forrester Research Inc. The quandary is paralyzing many organizations. According to Forrester, only 17% of companies in a recent survey said they were confident that their electronically stored information would be accurate, accessible and trustworthy in the event of an e-discovery proceeding.

The stakes of inaction are high. According to a report issued in 2007 by The Sedona Conference, an organization that creates standards for e-discovery, it costs approximately $1 to store a gigabyte of data and $30,000 to review it.

Best practices for e-discovery

Savvy organizations are waking up to the inevitable and taking action, usually forming a task group as the first step. Baldridge and others recommended the committee include leaders from legal, IT, human resources, finance and operations. "It's critical to bring those stakeholders together -- it's not just a technology issue or just a legal issue," Baldridge said. Such a group can help overcome an endemic problem identified by Hill: "Key stakeholders in IT and legal don't communicate and collaborate as they should," he said.

Despite differences, group members must identify electronic documents that may be encompassed in a discovery proceeding in order to establish a document retention policy. Tax records must be kept for seven years; other data, such as email traffic, should be deleted after a matter of months according to a regular electronic records management schedule. The group must also consider technology tools for document management and archiving, of which choices range from on-premises applications to Software as a Service offerings.

Task groups should pay attention to a growing body of best practices information compiled by different organizations, such as The Sedona Conference. In an effort to help enterprises get a handle on e-discovery search, the Text Retrieval Conference initiative of the National Institute of Standards and Technology has conducted annual studies to bring best practices to light. The Electronic Discovery Reference Model group is also crafting practical guidelines and standards for e-discovery.

The search for better search

Sooner or later, the question of search technology must be addressed. Some corporate task groups start with the assumption that the capabilities of Microsoft's Exchange 2007, Google Desktop or enterprise search tools such as the Google Search Appliance are good enough. Lawyers and judges often have a similar impression. "A lot of the courts think that if you can Google the entire Internet, then why can't you just Google the enterprise," Bace said.

Experience is showing, however, that a different kind of search is needed for e-discovery. While enterprise search tools are intended to make knowledge workers more productive, e-discovery search tools are geared to support a legally mandated discovery initiative by applying clear search criteria, tracking searches meticulously and keeping costs low (see sidebar).

While enterprise search tools typically discover a plethora of documents, ranking them from most relevant to least relevant and likely including some that are irrelevant, e-discovery search tools must find only the relevant documents -- but they must find all of them. That's because documents unearthed in the e-discovery process must be read and analyzed by lawyers, a step that can add tremendous cost to the project if false positives are permitted among the documents retrieved. In addition, the e-discovery search process must be defensible -- that is, clearly and convincingly explained to a nontechnical judge or regulatory body. That may not be possible to do if the search tool is not specifically designed for e-discovery tasks.

Advances in search technology are improving a company's chances of not being taken to the cleaners when a legal hold order or e-discovery request appears. Traditional search engines find documents containing keywords often linked with Boolean operators such as and, or, not or near. Several vendors have crafted products and services that implement conceptual search, which looks for groups of words, rather than single word matches. Others implement fuzzy search, which finds documents that are predicted to be relevant, even though they do not contain the specific word in question.

Predictive tagging and conceptual search

Baldridge uses a tool from Recommind Inc. called Axcelerate, which implements a conceptual search technology that Recommind calls predictive tagging to winnow documents to a relative handful for lawyers to review. "Otherwise, you might not get to those documents until $100,000 into the review process," Baldridge said. "Axcelerate gives you a seed set. You can assess whether you want to proceed with the case or not. In the old Boolean search approach, it may take months to find the same documents."

Another vendor, Clearwell Systems Inc., offers a search appliance called E-Discovery Platform, which uses conceptual search to cull a manageable quantity of files from email systems, databases and enterprise applications. The Clearwell appliance is pointed to a data store, such as an Exchange server, database or archive on which it performs a conceptual search. Alternately, the data can be collected with a tool such as Microsoft's Robocopy and then searched with the appliance. Networking giant Cisco Systems Inc. has implemented the Clearwell E-Discovery Platform so its lawyers can search, analyze and review documents remotely via a secure virtual private network, Clearwell officials said.

If you can't produce [electronically stored information], you are subject to the same sanctions and penalties if you had destroyed the evidence on purpose.

John Bace, analyst, Gartner Inc.

Page One LLC, a litigation support company in Nashville, Tenn., uses the MetaLINCS E-Discovery search tool from i365, a subsidiary of Seagate Technology LLC, to boil down piles of data to a manageable level. Law firms in the Tennessee and Kentucky area call on Page One when a client receives a legal hold order. Page One then feeds the data to the i365 MetaLINCS E-Discovery server, which uses a conceptual technology called pinpoint search.

Page One president Rip Clayton said his firm can save a company hundreds of thousands of dollars with the tool, compared with having lawyers pick through irrelevant material. "They don't have to bill at $250 per hour over stuff that IT has turned up incorrectly," he said. Using the MetaLINCS server, Page One performs data deduplication, then creates a detailed chain of custody that includes page-level and Bates numbering, which numerically organizes files as evidence, Clayton said.

Fios Inc., a Portland, Ore.-based provider of hosted e-discovery services, uses a variety of technologies, including keyword and conceptual search, to cull through data. Law firms send Fios data either electronically or by shipping a hard drive. The company's Prevail service incorporates both desktop keyword search and conceptual search from such companies as Content Analyst Company LLC and Kroll Technologies LLC. Brad Harris, director of product management at Fios, said his firm is now performing e-discovery services over voicemail records for many clients using technology from Nexidia Inc.

Such e-discovery search tools are critical in determining whether to defend a case or to settle. If the e-discovery process costs $10 million and the suit will cost only $5 million, then it makes sense to settle. "This helps you discover what you're in for before you spend the $10 million," Fulbright & Jaworski's Baldridge said. "Attorneys say they have to look at every document, but Recommind helps you look at the most important documents first."

Bottom line: Be prepared

As courts and regulatory bodies have awakened to the electronic age, businesses of all kinds must prepare for the unwanted day they must produce documents upon demand. Organizations should form a corporate task group to implement document management policies and should decide whether handling e-discovery tasks in-house or relying on litigation support service providers makes the most sense. Whatever the path chosen, the goal is the same: to avert catastrophic e-discovery costs, unfavorable out-of-court settlements and stiff penalties.

"It's going to be a requirement; corporations cannot continue to assume the costs of litigation. E-discovery costs are making litigation out of reach by some companies," Baldridge warned.

Because many of the regulations enacted within the past several years are just now beginning to be applied, organizations must pay attention to enforcement patterns as well as evolving e-discovery case law. As e-discovery search becomes more mature, courts are likely to expect a certain level of competence and when it's not there to levy penalties. Said Forrester's Hill, "Organizations are not yet willfully negligent for not having search in place, but that is where we're ultimately going to head."

Stan Gibson is a Boston-area technology writer. Write to him at editor@searchcompliance.com.

This was first published in July 2009

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