Technology is often key to helping any business endure a government investigation or lawsuit—and can just as often be the company’s undoing if it navigates the perils of e-discovery poorly.

Lackey

“The work you’ve done prior to that day is going to determine in large measure how effective you’re going to be in your response,” Michael Lackey, a partner at the law firm Mayer Brown, said during a Jan. 28 Webcast on best practices to manage e-discovery.

One best practice, Lackey said, is to have a sense of what electronic documents will be examined—either by government investigators or defense attorneys—and what issues you may have with those systems. “Do I have an automatic deleting system where I’m going to have to act quickly?” he said. “What is my back-up system? Am I rotating tapes, and do I need to stop doing that?”

Likewise, determine as quickly as possible exactly when you must implement a “litigation hold” on relevant documents, and what the scope of that hold is. “Where you cannot implement a hold, you need to document that,” said Angeline Chen, associate general counsel of Lockheed Martin, who also spoke during the Jan. 28 Webcast. “That’s really the best that you can do.” Not saying anything at all about litigation holds is a big mistake, she added.

The patent infringement case Keithley v. Homestore.com is a good example, according to Browning Marean of the law firm DLA Piper, who spoke during another e-discovery Webcast last week. In the Keithley case, a federal magistrate ruled against three businesses for destroying evidence and for claiming they didn’t have key documents and source code, which promptly showed up when sanctions were threatened.

“Where you cannot implement a [litigation] hold, you need to document that … That’s really the best that you can do.”

— Angeline Chen,

Associate General Counsel,

Lockheed Martin

The lawsuit stemmed from a letter that software engineer Kevin Keithley wrote in 2001 to TheHomeStore.com, the National Association of Home Builders of the United States, and the National Association of Realtors, in which he threatened litigation for their alleged infringement on his software patent for accumulating, organizing, and displaying real estate information with their various Websites. Keithley did not officially file a claim, however, until 2003.

Marean

The case raises the question of when the duty to preserve goes into effect, Marean says. In Keithley, for example, did the defendants’ duty to preserve become effective in 2001 upon receiving the original threat? Or in 2003 when the actual claim was filed? “Obviously you can’t bring the company to its knees every time you get a litigation hold from somebody,” he said.

Marean recommended several practical steps to take. First, reply to the person who issued the letter, essentially informing the person that if he is serious, your company will institute a litigation hold—but also impose that cost on the threatening party. “Good luck collecting it,” Marean says, “but it might bring them to the table.”

Owen

Kathy Owen of DLA Piper, who spoke along with Marean, added you could also try telling the other party that you don’t consider the letter a threat of litigation, so you aren’t imposing a litigation hold. “That puts the ball back in their court,” she said, and pressures the other party to divulge its lawsuit intentions.

A second practical step could be to keep a database of such threatening letters. For example, Marean says, if only one letter out of 100 results in litigation, you might have better success explaining to a judge why you did not implement a hold if those letters are documented, he said.

Documentation is especially important in matters of attorney-client privilege. Owen cited another case, Victor Stanley v. Creative Pipe, where 165 privileged documents had accidentally been turned over to the other litigant because the defendants were rushing to meet a deadline.

Even though the defendants claimed to have run search terms to identify the privileged documents, “The court cited them for their failure to show that anybody with any expertise had looked at those search terms,” Owen said. Interestingly, she added, the plaintiffs first discovered the privileged documents, not the defendants themselves.

Written Policies

Having written policies in place is another effective way to ensure that employees are aware of their expectations. “You need to make sure … that you’re looking at them periodically and adapting to the new legal landscape and the new technologies that are available,” Lackey said.

KEITHLEY V. HOMESTORES

What follows is the U.S. District Court for the Northern District of California ruling on Keithley v. Homestores.com.

The Court awards monetary sanctions as stated in this Order, subject to production of

Plaintiffs’ billing records or other documentation to substantiate that amount. An award of expert fees for Mr. Lanovaz or other technical consultants to re-analyze the evidence is warranted, subject to an additional declaration(s) detailing what additional work is necessary in light of the Court’s recommended adverse inference. Plaintiffs shall file any declarations no later than September 2, 2008.

The Court also recommends that the district court give the following adverse inference jury instruction: “If Plaintiffs prove that Defendants infringed any claim of the ‘025 patent after pour-over by the operation of the www.realtor.com, www.homebuilder.com, www.homestore.com, www.factorybuilthousing.com or www.remodel.com websites, the jury shall infer that the same websites infringed the ‘025 patent from the date it was launched.”

Any party may serve and file specific written objections to the recommendation portion of this Order within ten (10) working days after being served with a copy. See 28 U.S.C. § 636(b)(1)(C); Fed. R. Civ. P. 72(b); Civil Local Rule 72-3. Failure to file objections within the specified time may waive the right to appeal the District Court’s order.

IT IS SO ORDERED.

Source

Lawsuit: Keithley v. Homestores.com (Aug. 12, 2008).

“You don’t want to expose your employees to having their personal computers become the subject of a governmental investigation”—but that can happen, Lackey warned, if your company allows employees to download business records to their home computer. Limiting the locations where employees can access company documents is one solution.

Still, enforcing policies (even those written and circulated) is easier said than done. Employees may destroy documents, despite any directives put in place. Keeping track of how the company preserves documents in the event of a subpoena shows that the company is at least making good-faith efforts, said Joseph De Simone, another partner at Mayer Brown.

Knowing the relevant timeframe of documents that will be examined is critical, Lackey said. For example, a definite timeframe of data is much easier to secure (imagine the challenge of securing information in an ongoing investigation, such as e-mails that haven’t been written yet). “You need to keep track of where the documents have come from and where they’re going, and that chain of custody needs to be maintained throughout,” Lackey said.

Collaboration among departments also is crucial. While records retention is the cornerstone of preparation, business processes and operations generate those relevant documents—making collaboration among various departments so important, Chen said. In all those situations, in-house counsel is best positioned to approach those operations and inform them of how to proceed, she said.

“We are the ones who are positioned to be able to reach out and find out what those policies are, and lay the groundwork for outside counsel when we choose to have them come in and provide us assistance in these types of situations,” Chen said.

Collaboration is needed in other areas, as well. For example, De Simone said, human resources and legal departments must have a procedure in place to handle the records of a departing employee.

Owen noted that you might even want to consider hiring a contract attorney, who could offer more expertise than a law firm that doesn’t specialize in the specific area under dispute. “Contract attorneys have, for the most part, made a career decision to do document review,” she said.