Commercial litigation: Keeping it digital

Issue August 2010 By James Berriman

In commercial litigation, the client's business records are often a major source of evidence. Today, most business records are electronic rather than paper, and have enormous efficiency advantages over paper.

Electronic documents can be searched and sorted. They can be filtered by date, keyword and type. Duplicates can be removed automatically. The cost of copying is minimal and every copy is a perfect copy. They can be transported at almost no cost, occupy virtually no space and consume far fewer resources than hardcopies. They can be reviewed electronically, eliminating the need for a paper-filled war room. The cost of handling and using electronic documents is a fraction of the cost for an equivalent volume of paper documents.

But many litigators negate many of these inherent advantages by turning the client's highly-efficient electronic business records into paper documents for the purpose of conducting the litigation.

However, the practice of printing and producing hardcopy versions of existing electronic documents is drawing to a close. The Federal Rules of Civil Procedure were amended in 2006 to specify the forms in which electronic information may be produced. Unless otherwise required or agreed, the producing party has two options: either to produce the files in the forms in which they are ordinarily maintained, or else to produce them in other reasonably usable forms (see Rule 34(E)(ii)). Many state courts are adopting similar requirements.

As a practical matter, this usually means that the producing party will either produce electronic files in their original native formats (as Word documents, as Excel spreadsheets, as e-mail files, etc.) or else convert them to an industry-standard electronic production format that includes a TIFF image of each document, the searchable text extracted from each document, and certain fielded data (like e-mail header fields) extracted from each document. The first option constitutes the form in which the files were "originally maintained," and the second constitutes another "reasonably usable" form. The second option is usually a better choice, as it allows endorsement with confidentiality legends and control numbers, eliminates the risk of inadvertent alteration and spoliation, and obviates the need for the receiving party to obtain licenses for all the applications that created the original documents.

Where does this leave the old paper option? Can a litigator still get away with printing the client's electronic documents to make a traditional hardcopy production? Some attorneys still do so in small cases. But it is increasingly likely that the receiving party will object and the court will frown on the attempt. This is especially true in larger cases when the efficiencies of electronic documents are necessary to make effective use of them. Paper simply is not a "reasonably usable" substitute for fast, searchable, portable electronic documents.

So the process of civil discovery - collecting, reviewing and producing the client's documents - will become increasingly electronic. But many litigators remain concerned that the cost of electronic discovery will be higher than the cost of the paper discovery that it replaces.

In fact, however, the opposite is true. Electronic discovery is vastly less expensive than the equivalent volume of traditional paper discovery. Further, it is the attorney - not the technician - who controls the scope and cost of an e-discovery project. The issue is simply one of recognizing the parallels between e-discovery and traditional paper discovery to see how the attorney's judgment controls the scope and cost.

The experienced attorney knows that the cost of discovery should not be disproportionate to the value of the dispute. A hundred-thousand-dollar claim cannot justify a million-dollar document production. In the realm of paper discovery, if the scope of a document request is too broad, the litigator will confidently object based on the traditional grounds of undue burden and excessive cost. Even though all of the requested documents might be technically relevant, the litigator will argue that discovery should be limited to the materials that are most likely to be pertinent based on rational criteria.

But when electronic documents are involved, even the experienced litigator may be unsure of how to address scope and cost without running the risk of error and sanctions. This is not due to any failing on the part of the attorney. It is because electronic document repositories tend to be much larger and more complex than traditional paper repositories, and because electronic documents are so easily altered and deleted.

Fortunately, the principles of cost-effective discovery are equally applicable in the electronic world. In any discovery project, the most expensive element is usually the cost of attorney review time. The cost of discovery is therefore controlled primarily by controlling the size of the pool of documents to be reviewed. The size of that pool can be broadened or narrowed based on criteria such as which custodians and repositories to include, the date range of the documents to be included, and the keywords to be used for filtering.

If these criteria result in a pool of documents that is too large and expensive to review in the context of the dispute, then the attorney will narrow the criteria, just as has always been done in traditional paper discovery. This could mean reducing the number of custodians and repositories, reducing the date range, and tightening the keyword list. The attorney has the ability to adjust those criteria to create a review set that is cost-appropriate in light of the amount in controversy. In short, the attorney controls the size of the review set and thereby controls the cost of discovery.

However, the attorney must also be sure to protect the client against the risk of sanctions by taking steps to ensure that the criteria are acceptable, that evidence is not lost and that the scope can be broadened if necessary.

The attorney avoids the risk of spoliation by preserving everything that is potentially responsive (even if of limited importance), since preservation by itself is much cheaper than processing and review. In short: the attorney should preserve broader than what is selected for review.

The attorney avoids the risk of disputes regarding scope by disclosing to opposing counsel the criteria that will
be used to create the limited subset that will be reviewed for production. Preservation plus disclosure is the attorney's protection.

If, after such disclosure, there is a disagreement about the scope of what will be reviewed, the parties can resolve it by negotiation or by motion before the cost of review is incurred. If the scope turns out to be too narrow, the attorney can broaden it accordingly, since the larger universe has already been preserved. Finally, if subsequent review of the initial production set reveals that the criteria were too narrow, the production can be supplemented incrementally from the universe of preserved materials to the extent appropriate.

The element of disclosure ensures that both parties are aware of the initial limitations on the scope of what will be reviewed for production. The parties typically agree to start with a core list of key custodians and a focused set of criteria that are closely correlated with relevance (names of key participants, related company names, product names, project names, patent numbers, etc.). The parties agree that they can make follow-up requests after they have had a chance to review the results of the first production.

Here is a roadmap of the approach:

First, preserve the broader pool of what is potentially relevant (even if of low importance) because preservation is relatively cheap. For example, in the context of a company's mail server, you can save a full backup of the entire mail server at very low cost, even though you only expect a small number of mailboxes to be relevant to the dispute.

Second, within that broader pool of preserved materials, identify the subsets most likely to yield the evidence that matters. This is typically based on identifying the custodians involved in the dispute and the repositories associated with those custodians (their mailboxes, their home directories, the group directories to which they had access, etc.).

Third, for those subsets, develop rational culling criteria that are expected to reduce the volume to a practical amount and also to be well correlated with relevance. Culling typically includes removal of duplicates, filtering by the appropriate date range, filtering by keywords, filtering by file types, etc.

Fourth, disclose to the opposing party the custodians, repositories and proposed culling criteria to be used as the basis for creating the initial review set for the first production.

Fifth, negotiate with the opposing party to refine and finalize those criteria.  Agree that after the first production has been made, the parties may make reasonable supplemental requests based on what they learn from the first production. This can include identifying additional custodians, additional search terms, etc.

Finally, since the larger pool of potentially relevant materials has been preserved, you can always go back to get just the additional materials you need, and the supplemental production requires only the incremental addition of those additional custodians, repositories or keywords.

With this approach, the attorneys can remain in control of the size of the review set and the overall cost of discovery.

James Berriman is CEO of Evidox Corp., a provider of e-discovery and litigation-support services. Berriman has been developing and using litigation technology systems since 1982. Before co-founding Evidox in 2006, he was senior counsel and director of litigation technology at Goodwin Procter LLP.