by Guest Blogger Donald P. Butler, Deputy General Counsel Seneca Resources Corporation
This article is based on a presentation I made at an AccessData User’s Conference in May, 2011 with Elizabeth Knower, the Founder and President of Complete-Discovery LLC. It expresses my personal views only. It does not express my company’s view or perhaps even my co-presenters view. It is analyzing the problem from the point of view of a “reasonable man” having the position of “General Counsel,” although such a thing may not occur that often in the real world.
In the movie “It’s a Wonderful Life,” the world with George Bailey is infinitely better than the world without George Bailey. The world with George is always sunny, while the world without George is always dark, a dynamic that I find to be perfectly analogous to life with an in-house e-discovery capability versus life without.
Let’s consider the quality of one’s life under these two circumstances. Assuming it’s affordable, and it works across the spectrum of tasks required in e-discovery⎯very important assumptions indeed⎯how much illumination does an in-house e-discovery solution buy?
As an in-house lawyer, I’m not always granted the protection of attorney-client privilege, but I’m still a lawyer, so when a dispute arises I may claim attorney work product protection. This protection is available once there is an active dispute, but once there is an active dispute one’s preservation obligation also begins. So, since I want that protection as soon as possible, I should probably start my preservation efforts quickly as well. The preservation obligation is there whether I’m the potential plaintiff or the potential defendant. If I am the defendant, my preservation obligation may begin with a demand letter or a formally served petition or complaint. If I am the potential plaintiff, it may begin as soon as I (or outside counsel) start researching the facts and the law about whether I have a valid case.
In theory, I don’t need an in-house e-discovery capability to send a litigation hold notice and impose on others the duty of preservation. In theory, I don’t need an in-house e-discovery capability to interview the custodians and determine where they keep their records. However, the problem for the jack-of-all-trades General Counsel is that current industry analysis states that this traditional process is no longer best practice. In fact, I am bombarded with newsletters from law firms telling me that traditional practices are not enough. After all, the duty to preserve is one most employees seldom encounter, and meeting this obligation while doing at least one job, usually more, for the company can prove unmanageable. So in reality, I must take some active preservation steps, especially with respect to electronic documents, and especially with respect to the subset of electronic documents we know as e-mail. (In days gone by, the dream was to find the killer memo in file cabinets stored in warehouses. Today, it’s e-mail.)
I have three choices.
1) I can do nothing after I send the litigation hold notice to the custodians and perhaps interview them. This makes for a very, very dark world. George where are you?
2) I can bring in an outside vendor who will charge significant amounts of money to take the steps necessary to meet my preservation obligation. However, even if I’m only charged a few hundred dollars per gigabyte, my company, which is not big, has too much electronically stored information for that option to be cost-effective. In fact, controlling costs while paying per gigabyte is not possible. For the purpose of our story, let’s assume the outside vendor cost is a “modest” $250,000. That is an amount of money that, if I spent it, would have Management in my office telling me I have some “splaining to do.” (That’s the way my dad always said it.)
In certain situations, that explanation may be difficult. If I spent that $250,000 in February after I received a demand letter in January asking for $100,000, and settled the case for $50,000 in March, I don’t think any explanation would make Management happy. Spending $300,000 when the demand was only $100,000 will not get me “employee of the month”. Now I could gamble that I would settle, and not bring in that outside vendor for $250,000. If I settle, then all is well. If I don’t settle, then I would have committed what these law firm newsletters indicate is the preservation sin of all preservation sins: issuing a litigation hold notice, then not even trying to preserve documents and email. This might mean major fines and other adverse actions against the company and perhaps me personally. The irony is that the management that might want to can me if I spent $250,000 to preserve ESI for a case I settled for $50,000 before the vendor’s bill was even received is the same management that might want to can me for incurring $500,000 in fines and losing the case on adverse inferences.
If doing nothing is too dangerous and hiring an outside vendor is too expensive, then my world is still rather dark. George??
3) I can pay an amount of money once to purchase an in-house e-discovery solution that actually goes into the hands of the company’s IT department. I can take the active preservation steps I need for any case at any time and the only additional cost is reasonable annual software support and maintenance fee. And by reasonable, I mean an annual fee management doesn’t notice. This will vary significantly from company to company. How much can I afford to spend upfront and each year? It depends on how often over the course of a year I have this preservation obligation. I can’t afford to spend anything for something that doesn’t work. That also gets one canned. But if it works, I don’t need many cases each year to justify the cost. In fact, I might not have any cases, but I would have some freedom and peace of mind that I would not have without the solution.
I would not have to tell management that I can’t bring a case as plaintiff for $300,000 because it would all be eaten up in e-discovery fees. I don’t have to tell them that they should pay the $100,000 demand, even if the demand is unreasonable, from a third party because I will almost immediately spend twice that on my preservation obligation. I don’t have to accept an unfavorable settlement because I didn’t meet my preservation obligation and can’t afford to go to trial. In addition, I have done something for all of our employees. I have provided an insurance policy for those custodians who accidently delete something because it would have already been collected. Now this is a sunny world indeed.
It’s clear that the world is a better place with George Bailey and an in-house e-discovery capability in it – as long as they are good at their jobs and not asking for too much money to run the savings and loan!