Computing Litigation

California law reaches toddler stage as lawyers struggle to keep up

Back Longreads Apr 30, 2011 By Susan Hyman

The state law requiring the use of electronic documents as evidence in civil lawsuits, also known as e-discovery, turns two next month, and local attorneys say its application is still in the developmental stages.

“You still see a very broad range of legal practice. Some lawyers are focused on obtaining electronic data; others are still old school,” says Jeff Galvin, partner with Downey Brand LLP in Sacramento.

“There seems be a lot of scrambling on both the plaintiff and defendant side,” says Joy Rosenquist, lead attorney for civil litigation and employment law at Goyette & Associates in Gold River. “Although the California Electronic Discovery Act is in effect, there are few court decisions that tell entities how to handle e-discovery, and there is definitely a lack of protocol.”

Attorney Glenn Peterson of Millstone, Peterson & Watts in Roseville says he is “still surprised” at how many litigators know little or nothing about electronically stored information.

A large barrier to e-discovery is the amount of available data, which grows faster than a newborn baby. Lee Curtis, vice president of Precision Discovery in Santa Clara, has specialized in computer forensics and security technology consulting since 1994. Curtis teaches California state agencies how to handle electronic evidence. “I have to update my presentation each time I give it as technology changes and storage capacities increase daily,” he says.

“We now have terabytes upon terabytes of data that must be wrestled with,” says Don Vilfer, founder of Califorensics, an e-discovery firm in Roseville.

“Emails and texting have really changed the amount of records that exist,” says Chris Chediak, who practices corporate and â?¨business law with Weintraub Genshlea Chediak in Sacramento.

As a result, e-discovery firms have become a huge industry. A 2010 nationwide survey by Socha Consulting LLC and Gelbmann & Associates estimates the market value of such firms reached $2.8 billion in 2009, and it is expected to expand about 10 to 15 percent this year. “Be aware, that dollar figure is a best guess,” says George Socha of Socha Consulting, a former attorney who helped conduct the survey. “And it only includes the technology collection process and not the costs involved in review of data.”

Curtis says his e-discovery business has “gone from a locomotive to a bullet train” since federal amendments in 2006 placed greater responsibility on lawyers to preserve and produce electronically stored data. The California Electronic Discovery Act enacted in 2009 mirrors the federal law with a few exceptions. Both have meet-and-â?¨confer provisions designed to encourage parties to agree early and â?¨be knowledgeable of electronically stored data.

E-discovery firms use tools and protocols to cull vast amounts of this electronic data (which can include everything from short emails to lengthy financial records) and create an easy-to-use and accessible product. The firms deal with issues such as trade secret theft; investigations in human resources, internal corporation issues, fraud and white-collar theft; intellectual property theft; and evidence destruction.

And even if electronic evidence isn’t inadvertently or otherwise destroyed in a legal case, attorneys can face sanctions for failing to produce it. In a 2008 case, attorneys for Qualcomm Inc. received disciplinary actions and sanctions amounting to more than $8 million for not producing about 40,000 pages of emails because they used the wrong search criteria. The sanctions were lifted last year, but a strong message was sent.

“You have to be on top of your client right away with regard to electronic data,” says attorney Daniel McGee of Ellis LaVoie Poirier Steinheimer & McGee in Sacramento. “There’s a lot of mischief out there, especially in the metadata.” Metadata, or data about data, is the information stored in a file that can tell its history, who has used it, the date it was created or modified and more. An example is the track changes function in Microsoft Word.

“Before 2009, I had convinced more than one judge that producing all documents in Adobe PDF format was sufficient,” Peterson says. “That doesn’t work today.” Electronic data needs to be in its native format and searchable. Peterson says there’s no requirement for electronically stored information to be printed, but it is common in litigation so attorney-client and other privileged information can be more easily redacted.

Assistance with e-discovery is out there. “There is an ever-increasing array of electronic tools for searching and categorizing electronic data,” says attorney J. Leah Castella of Burke, Williams & Sorensen in Oakland, who gives presentations for lawyers on e-discovery. A recent article in The New York Times by John Markoff describes some of these software programs, which can analyze more than a million documents for the relatively low cost of about $100,000. The article notes how computers have come closer to mimicking human reasoning — think of the computer Watson’s defeat of Jeopardy champions Ken Jennings and Brad Rutter — and proposes that these software programs could eventually replace “armies of expensive lawyers.” Attorney Castella disagrees, noting that while the computer programs can do more of the e-discovery legwork, “at the end of the day, you still need lawyers to evaluate the data.”

The e-discovery provider industry is growing to keep up with demand, but not fast enough, says Socha, who has created a provider website, apersee.com, which lists about 1,100 firms nationwide. He says this number is not sufficient to keep up with an estimated one million lawyers nationwide and 11 million lawsuits filed every year. He also noted that 80 percent of lawyers are in law firms of five lawyers or fewer. These smaller firms simply don’t have the resources to conduct in-house electronic discovery and must rely on outside companies.

On the corporate side, large companies are starting to bring the ESI function in house. Kaiser Permanente and Hewlett-Packard Co. are two local examples, Curtis says. A whole body of information on corporate ESI is available in Enron Corpus, a complete database of all the emails gathered in the infamous Enron case that is finally wrapping up after eight years. According to the same The New York Times article, the database provides an understanding of how language is used and how social networks function. â?¨Curtis worked on the Enron case off and on for four years while with another firm.

He says there are two common corporate scenarios his e-discovery firm handles. The first is one company going after another for taking something of value, such as a former employee taking a client list. The other involves an assertion of malfeasance or wrongdoing, such as a claim that a company did not provide a service it promised under contract.

The 2010 Socha-Gelbmann survey observed that although high-profile corporate cases with massive volumes of e-discovery and million-dollar costs have hogged the spotlight, the aggregate of smaller cases dwarfs them. The survey confirmed that in smaller matters, corporations, law firms and providers have ignored dealing with ESI. “This has been due to a variety of factors, not the least of which is the relatively high cost of EDD products and services, and perhaps a bit of technophobia,” the survey stated.

Though use of ESI isn’t consistent, local attorneys suggest that businesses and corporations should have policies in place.

“Everyone from small mom and pops to large retailers need to be aware of their internal practices on electronic information,” says attorney Lisa Ryan of Cook Brown of Sacramento, who represents employers. “Unfortunately, most businesses aren’t informed, and they should be.” She suggests getting ahead of the game by knowing what the information is and how it is stored, setting up a plan and having a point person to start tracking and documenting all information technology practices — including installations, modifications and patches. And then there’s this tidbit — do employers know whether they archive or backup information? There’s some legal distinction between the two, Ryan says.

Before litigation occurs, attorney Rosenquist suggests companies write ESI preservation protocols, which are more defensible in court. Preservation does not mean every document, and the standard is reasonableness and proportionality to the lawsuit, she says. Different industries may have legal and regulatory compliance to follow with regards to ESI preservation. Businesses should understand the technology they are using and, if not, bring in the right sources and vendors to explain it.

Galvin suggests the ESI policy should be thoughtful, logical, practical and defensible, though he notes that it is “hard for business unless they have been through it. It’s not a pressing, everyday issue.”

“Train all personnel in the appropriate use of email,” Chediak says. “Email takes 20 seconds to prepare, but it stays around for a long time.”

For a conceptual view of the electronic discovery process, there’s Socha-Gelbmann’s electronic discovery reference model. It lists the nine stages of e-discovery: information management, identification, preservation, collection, processing, review, analysis, production and presentation. Socha-Gelbmann notes that the stages are not necessarily a linear process, and its 2010 survey found that most consumers and providers are focused on the initial steps.

When defending companies in litigation, McGee has a plan for ESI that includes identifying all the ESI; figuring out the expense of providing ESI and whether those costs can be shifted or negotiated (the responding party typically pays for e-discovery); preserving the ESI; collecting the ESI as early as possible; and getting the ESI to legal counsel right away. He says sometimes privileged information is inadvertently disclosed during e-discovery, and it becomes necessary to notify the other party to destroy, sequester or not consider it.

“In litigation, at the very least, your lawyer should discuss ESI with you,” Peterson says. “More business owners should expect to have technical people in house to help them with this area in the future.”

Historically, Socha explains there were three places for legal practitioners to go for information. The first was people: what they knew and said in written notes, statements, interviews, trials, depositions and testimonies. The second was tangible objects, such as the accelerators in Toyotas. And the third was paper — on desks, in offices and warehouses, and at home. He recalls only one case in his 16 years of legal practice where two sheets of paper became the “smoking gun” in a case because they revealed insurance fraud.

But in the present, he says “you better be thinking about electronically stored data.”

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