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M E R R I L L L E G A L S O L U T I O N S

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tTotal Evidence Management™:A Winning Approachto Complex Litigation in the Digital Age

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Introduction 1

Revising litigation guidelines for the digital world 1

Total Evidence Management 2

The price of failure 5

Outsourcing Total Evidence Management services 7

Back to business 8

Cont

ents

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Total Evidence Managementefficiently combines andmanages the myriad ofanalog and digital infor-mation that is subject to discovery.

IntroductionLike the rest of the world, the legal profession has entered an age of sophisticated andmaturing digital technologies. Up to two-thirds of the data created by corporations andagencies never appears in printed form. This inevitably alters how lawyers handle clients’litigation – particularly “electronically stored information” (ESI) discovery and production.It is now recognized that:

� ESI is dynamic and different from paper media� ESI may be inaccessible� ESI can be difficult to preserve� Waiver of privileged ESI can occur� Data volumes are immense

Total Evidence Management™ (TEM) efficiently combines and manages the myriad of analogand digital information that is subject to discovery. This paper defines TEM in the digitalage and discusses how comprehensive electronic data discovery and production protocolscan save clients time and money and potentially change a litigation outcome.

It is, after all, during discovery – not in the courtroom – that most cases are won or lost.

Revising litigation guidelines for the digital worldThe rampant growth in the volume and complexity of ESI drove a series of changes to theFederal Rules of Civil Procedure (FRCP). On Dec. 1, 2006, the FRCP was modified with keynew provisions.

Following is a summary of some of the more important changes in the revisions:

� Initial disclosures now include ESI. FRCP 26 (a)(1). ESI is also included in Rules 33(d),34(a) and 34(b)

� During the preliminary scheduling conference, counsel is required to discuss “anyissues relating to preserving discoverable information,” “any issues relating todisclosure or discovery of ESI, including the form in which it should be produced,”and issues related to privilege and work product protection. The report of parties’planning meetings and discovery plans must cover these topics for the subsequent Rule16 proceeding and order. FRCP 26(f)

� A return procedure is provided to resolve issues of inadvertent disclosure ofprivileged information. FRCP 26(b)(5)(B)

� A party is authorized to respond to a request by identifying ESI sources notreasonably accessible due to undue burden or cost. On a motion to compel, theresponding party has the burden to show that the sources are not reasonably accessible,and the court may still order production. FRCP 26(b)(2)

� Interrogatories requests to produce now include references to ESI and “data storedin any medium.” Requests may specify the form or forms for which data is to beproduced. FRCP 33 and 34

� “Absent exceptional circumstances, a court may not impose sanctions under theserules on a party for failing to provide ESI lost as the result of the routine, goodfaith operation of an electronic information system.” FRCP 37(f)

� Subpoenas for electronically stored information are provided for in FRCP 45 withprovisions generally parallel to Rules 26 and 34.

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Discoverable ESI data typesmight include spreadsheets,text documents, images,database files, metadata,deleted e-mail and evendigital video and audio files.

Though the revised FRCP took effect on Dec. 1, 2006, federal judges have been publishingopinions for many years in e-discovery disputes dealing with electronic data stored onvarious media, including disaster recovery backup tapes, computer hard drives and network servers.

In Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004), the Honorable Shira A.Scheindlin ordered a defendant to restore and disclose e-mails that, at the time, existed onlyon various magnetic backup tapes. The ruling came despite the defendant’s protests thatrestoring the ESI would cost at least $175,000 before attorneys’ fees. Zubulake also estab-lished that as soon as litigation is reasonably anticipated, parties must suspend routine document retention or destruction and place “litigation holds” on relevant ESI. Failure to doso can lead to summary judgments and serious sanctions – exactly what happened in UnitedStates v. Philip Morris USA, Inc., 327 F. Supp. 2d 21 (D.D.C. 2004). Philip Morris violated ajudge’s document preservation order and destroyed e-mail evidence, and the result was a$2.75 million fine.

Still, many firms have been slow to advise clients about the risks of ESI. A survey by theAmerican Bar Association’s Litigation Section showed that 83 percent of clients had noestablished protocol for responding to e-discovery requests, and fewer than 6 percentindicated that they were developing those protocols. Further, 68 percent of attorneys saidthat their clients rarely, if ever, took steps to prevent the overwriting of digital data on theircomputers – exposing lawyers and clients to penalties or sanction if ESI necessary at trial isinadvertently (or intentionally) destroyed.

Highly competent attorneys must preserve, process, review and analyze ESI. For example,data may exist in duplicate form, in “native” form (in its original course-of-business format)or other forms, or in an inaccessible format. E-mail – a source of “explosive” evidence thatlawyers are most eager to find – is produced at prodigious rates and routinely deleted.Discoverable ESI data types might include spreadsheets, text documents, images, databasefiles, metadata, deleted e-mail and even digital video and audio files. These exist on floppydisks, pen drives, Zip disks, hard drives, backup tapes, CDs, DVDs and various other media.Meanwhile, paper documentation hasn’t gone anywhere and remains primary evidence.

Total Evidence ManagementLitigation expenses are increasing dramatically, yet lawyers are bringing fewer cases to trial,largely because the digital age has made the discovery process far more nettlesome, complexand expensive. Litigation today involves incredible volumes of information in both analogform (paper documents, cassette tapes, videotapes) and digital form (documents, PDFs,spreadsheets, etc.).

In the past, litigation discovery was a matter of requesting and obtaining paper documents,copying, categorizing and Bates-stamping them, and organizing them in three-ring bindersand expanding files. Attorneys then carted the work around to hearings and conferences.However, digital complexity has ended the days when file cabinets were a lawyer’s gatewayto legal triumph. Instead, document management technology is now one key to successfullitigation.

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In the digital arena, a “document” can meananything from a white paper to a digital video or audio file.

The phrase “document management” is something of a misnomer, because in the digitalarena, a “document” can mean anything from a white paper to a digital video or audio file.Document management, therefore, is technology that helps organizations store, index,secure and retrieve files, and to manage ESI over time. The larger the organization, the moreimperative document management becomes.

Consider the following example: A corporation hires you as counsel to defend in abreach of contract case. First, you tackle the basics by establishing your defenses againstthe person who alleges that your client breached the contract. Next, you turn to themountainous evidence to organize it all. How do you identify, preserve, process andcontrol megabyte after megabyte, or in many cases gigabyte after gigabyte, when somuch evidence exists only on many and far-flung digital media forms?

It can be done. For instance, the signed contract, along with subsequent changes mayexist in PDF format and often has numerous e-mails and spreadsheets relative to it.With the right kind of ESI repository, you could place, via the Internet, all versions ofthe contract and all related “documents” as records into a litigation support database.You could also automatically code them and organize them with all the other digitizedpieces of evidence – by key witnesses, contract signatories, various legal issues germaneto the case, etc. With optical character recognition (OCR) software, you could also digitize and encode paper evidence to create word-searchable text documents. A run-of-the-mill document scanner could be used to generate flat, non-searchable TIFFimage files.

You could, in fact, input and encode every bit of pertinent evidence using the same ESIrepository to store, sort and retrieve that evidence on command. Using court reportingand videography services, you could also easily capture depositions and have themtransferred into the repository.

This is TEM in a nutshell. For a law practice, TEM is a full service solution for litigationsupport and case management technologies that can review digital documents, managetranscripts, stream synchronized transcript video, track discovery productions, processevidence, organize case files, archive data and enable online collaboration with clients.

Former assistant U.S. attorney, Michael Arkfeld is an e-discovery expert who describes in his“Electronic Discovery and Evidence (2nd edition 2007)” treatise an “online electronic documentdepository”:

The “online” or “virtual” document depository is best described as an online litigationsupport system where ESI can be searched, retrieved and then viewed and/or printed.These depositories can be set up on a secure Web site and accessed through broadbandor dialup and be available to attorneys at different physical locations. By using this typeof system, geographically dispersed attorneys and support personnel can access andfilter the data, make notes, code, make other comments regarding the data, andpreserve the changes for all legal professionals to share.

A law firm’s corporate clients churn out an immense volume of ESI. For example, imagine ifeach worker at a 10-employee company received 60 e-mails each work day. By the end of

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The Rule 34 amendmentsmean that courts nowactively encourage ESItransmission betweenparties in litigation. Thatonly underscores thenecessity of a TEM plan.

the year, that company would have 120,000 e-mails that could be called in the e-discoveryprocess. This scenario doesn’t even take into account the numerous spreadsheets, word pro-cessing documents, computer files and metadata – hidden data that describes and identifiesall that material – the employees generate. Now, imagine if the company had 10,000employees instead of ten.

Bearing in mind those increasing demands, consider what the e-discovery process involves. 1. The producing party must identify the likely ESI sources that may be requested by

their opponents.2. A litigation hold must be implemented to locate and ensure preservation of ESI. 3. Electronic evidence must be gathered in a way that avoids spoliation and maintains a

clear chain of custody. 4. The data must be processed and coded to make it readable and usable.5. The data must then be filtered to exclude irrelevant information – and only irrelevant

information. 6. Finally, competent attorneys must review the data and ensure outbound information

does not violate the attorney-client privilege.

These steps all represent significant time, expense and risk, yet the process cannot beavoided, as the FRCP revisions make abundantly clear. Rule 34, which established protocolsfor producing discoverable materials, originally focused on discovery of “documents” and“things.” It was expanded in 1970 to include “data compilations.” With the 2006 revisions,a “document” request includes any ESI stored in any medium. The revised rule alsoexpressly permits parties to sample ESI from opponents’ digital archives and permits partiesto request specific forms for opponents to submit digital data. However, such materialsgenerally are proffered as native files unless the parties agree otherwise.

The Rule 34 amendments mean that courts now actively encourage ESI transmissionbetween parties in litigation. That only underscores the change in the legal landscape, andthe necessity of a TEM plan.

A TEM program is also an excellent way to reduce firm and client risks and costs.

Risk management:Facilitates compliance with litigation discovery and regulatory information requests.� Facilitates timely information retrieval that can significantly help the client’s case or

business� Protects trade secrets and work product� Protects against critical information loss� Employs data search techniques that can exclude irrelevant data and defend against

spoliation claims� Stems the unbridled ESI accumulation through scalable filtering, retrieval and data

protection processes

Cost reductions:� Implements automation that reduces data sets and excludes irrelevant information from

discovery presentations� Removes a broad range of non-relevant data from laborious manual review using auto-

mated filtering technologies

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In numerous cases, courtshave imposed sanctions oradverse rulings on partiesthat failed to producediscoverable ESI.

� Ensures that the client and counsel obtain greater control over information flow� Packages and delivers the information cost-effectively

We will briefly return to these issues in the outsourcing section near the end of this paper.

The price of failureFailure to discover or produce electronic evidence can result in severe consequences,including:

� Imposition of court sanctions� Losing a winnable case� Disciplinary action against lawyers � Malpractice� Ineffective assistance of counsel claims

It is impossible to say how many winnable cases have been lost because electronic evidencewasn’t properly produced. There is also no objective data on how ESI mismanagement hasled to ineffective representation. However, in numerous cases, courts have imposed sanctionsor adverse rulings on parties that failed to produce discoverable ESI.

One landmark case is Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co., Inc., 2005 WL67071 (Fla. Cir. Ct. Mar. 1, 2005), rev’d on other grounds, 955 So.2d 1124 (Fla. 4th CA 2007)(plaintiff’s failure to present evidence at trial of correct measure of damages resulted inreversal). The Florida Circuit Court found that Morgan Stanley had systematically failed todisclose discoverable ESI back to 1998, and issued an adverse burden of proof order. The juryreturned a $1.4 billion verdict.

In Kemper Mortg., Inc. v. Russell, No. 06-042, 2006 U.S. Dist. LEXIS 20729, at *5-7 (D. OhioApr. 6, 2006), the court ruled that the plaintiff was entitled to an adverse inference becausethe defendant tried to destroy ESI evidence. The defendant, the court ruled, had “caused tobe installed on his laptop computer a program called ‘Window Washer’ . . . which preventsthe forensic recovery of deleted electronic files by overwriting them.”

In Qantum Communs. Corp. v. Star Broad., Inc., 473 F. Supp. 2d 1249 (D. Fla. 2007), the courtentered a summary judgment for the plaintiff and granted a motion for sanctions based onthe defendant’s failure to act in good faith after failing to produce “smoking gun” e-mailsrequested during discovery.

These are a few examples among many. “Whenever you think about electronically storedinformation, any one bit of data that is relevant and material is evidence,” says Arkfeld. “Ifyou lose it, the court is going to sanction you, because evidence is the entire basis of ourjudicial system.”

Conversely, courts have demonstrated some level of understanding toward parties whomade a good-faith effort, but failed to preserve and produce ESI, or parties who havedemonstrated that evidence destruction or loss was inadvertent or unavoidable.

In Convolve, Inc. v. Compaq Computer Corp., 223 F.R.D. 162 (S.D.N.Y. 2004), the court refusedto impose requested sanctions in a patent infringement case partly because the plaintiffsfailed to show that destroyed e-mails would have benefited their case, or that the e-mails inquestion had been intentionally deleted.

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It is impossible to predicthow a court will rule onissues such as unintention-ally destroyed evidence orthe failure to preserve backup tapes; and you certainly cannot count onsympathetic judges.

Occasionally, the court has embraced both principles. Take Zubulake v. UBS Warburg LLC,220 F.R.D. 212 (S.D.N.Y. 2003), where the defendant failed to preserve backup tapes contain-ing missing e-mails. The judge ruled that the plaintiff was unable to establish that the lostevidence would have supported her claims and so refused to issue an adverse inferenceinstruction. However, in Zubulake v. UBS Warburg LLC, No. 02-1243, 2004 WL 1620866,(S.D.N.Y. July 20, 2004), the court subsequently ordered an adverse inference instructionafter a nexus was found between a missing e-mail and the cause of action. The jury returneda $29 million verdict.

It is impossible to predict how a court will rule on issues such as unintentionally destroyedevidence or the failure to preserve backup tapes; and you certainly cannot count on sympa-thetic judges. Moreover, court sanctions and adverse rulings are just the tip of the icebergwhen it comes to improperly managing ESI, says J. William Speros, a Cleveland-based attorney and computer programming specialist who works as a consultant in litigation technology and data management. “There are numerous disadvantages that arise in thecourse of litigation because of parties’ failure to maintain and manage evidence properly,”he says. According to Speros, these disadvantages include the need to:

� Ask for and obtain continuances� Negotiate out claims that would otherwise be slam-dunks� Settle for higher dollar figures than might otherwise be the case

Add to that the simple problem of familiarity breeding contempt, Speros says. “If you are alawyer and fail to manage evidence properly,” he says, “you’re going to have to go back tothe client more times than the client wants to see you.”

Arkfeld suggests the electronic discovery process has become so complicated and so thornythat firms should seriously consider hiring a reputable outside vendor to handle the discov-ery processing of ESI.

One particularly thorny issue is that inadvertent production of privileged ESI can result inthe waiver of privilege. As one judge noted waiver of privilege is “a specter that haunts everydocument-intensive case”— a specter that has never loomed as large as in the digital realm.Federal Deposit Ins. Co. v. Marine Midland Realty Credit Corp., 138 F.R.D. 479, 480 (E.D. Va.1991). Amended Rule 26 addresses these concerns, foreseeing that pretrial conferenceagreements will work out privilege issues between the two parties and establish proceduresfor retrieving inadvertently disclosed privileged information.

Still, the courts have not always viewed such inadvertent disclosures with forgiving hearts.In Amersham Biosciences Corp. v. PerkinElmer, Inc., No. 03-4901, 2007 U.S. Dist. LEXIS 6841(D.N.J. Jan. 31, 2007) (unpublished) aff’d on reh’g, 2007 U.S. Dist. LEXIS 18648 (D.N.J. Mar. 14, 2007) the court found that the plaintiff may have waived protection to 542 privi-leged e-mails and did waive protection as to 37 separate privileged documents. The e-mailshad been kept in a Lotus Notes® folder, which was deleted. However, it was still available ina “larger” folder structure that was printed by the service vendor and was subsequently produced to the defendants. Though the 37 documents initially were labeled “unreadable”by the reviewing plaintiffs’ attorneys, they were successfully converted by the service vendorand disclosed to the defendants.

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Arkfeld suggests theelectronic discovery processhas become so complicatedand so thorny that firmsshould seriously considerhiring a reputable outsidevendor to handle thediscovery processing of ESI.

Ominously, the court ruled that when the plaintiffs’ attorneys failed to ensure that thevendor properly processed the information, they waived privilege.

Outsourcing TEM servicesElectronic data discovery requirements are relatively new, so there are not many e-discoverycompanies up to the task of maneuvering your firm through the ESI minefield. However,several such companies do exist, if you are willing to seek them out. Arkfeld recommendshiring consultants with experience in the e-discovery field. He says. “If you hire someonewho has just set up their own electronic discovery processing shop, without determiningtheir experience and capability to handle ESI, you’re going to run into problems.”

As things now stand, there are essentially two types of litigation support systems. One is aWeb-based ESI repository that runs on a remote server; the other is a client-side version thatoperates as a desktop computer application. You likely won’t rely strictly on in-house tech-nology to work with ESI at the highest, most efficient level. Some or all work will need to be outsourced.

A Web-based system will normally reduce the number of vendors that work with your data – increasing efficiency and reducing costs. This is doubly important because, as datavolumes associated with document production in the discovery process explode, so does the price.

Says Arkfeld, “What’s going on in the marketplace now is that somebody photocopies your paper, puts it in a three-ring binder and gives it to you. Somebody else may image itand make electronic copies, and may or may not ‘OCR it’ and turn it into searchabledocuments. They code it at the same time with the ‘to,’ ‘from,’ ‘date,’ ‘recipient,’people-matching, legal issues and some of those things.” Yet another vendor may processthe ESI and convert it to a specific litigation support format.

In other words, one vendor handles the hard copy, and another tackles the electronicdiscovery functions. “So then you need both companies to come together and make sure allof their data is correctly coded and put into the system correctly,” Arkfeld says.

A few full-service TEM vendors are emerging in the marketplace. Some services they offerinclude:

� Client consultation on data acquisition processes, data formatting processes and dataproduction

� Performing data acquisition and computer forensics services� Analog tape duplication and extraction� Data de-duplication (eliminating redundant document copies)� Data filtering (by date, keyword, file type and custodian)� Setting up the workflow process� Helping decide whether to use TIFF/PDF conversions or produce natively formatted files� Reviewing ESI strategies� Helping to craft the scope of discovery requests and interrogatories

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By optimizing the entireprocess with a single sourceTEM solution, law firms cansave clients time andmoney, and potentiallychange a litigation outcome.

Arkfeld suggests that cost and risk reduction make the single-vendor approach invaluable.Multiple vendors mean you must maintain multiple sets of contractual agreements, workwith multiple project managers, accommodate multiple schedules and manage multiplepayment streams. Further, you must manage delicate communications and oversee qualitycontrol with multiple parties. “You have to make sure everyone is doing their job,” he says.

If you miss discoverable materials while juggling communications, liability risks increasedramatically.

“You want them to be able to work with your client, to go out and get the data, to process itand put it into your system, review then disclose it to the other side. There are a lot of mov-ing parts,” he adds. “So doing it with one company is a really great concept.”

Back to businessWhere litigation is concerned, one of the less palatable side effects of the proliferation ofelectronic data is that, all too frequently, the focus winds up not on the merits of the case,but in haggling over the evidence. This was a concern expressed in the advisory committeenotes to the amended FRCP rules that were published in late 2006.

“When the committee deliberated on the liberal discovery rules that [were] drafted,” thenotes state, “they raised the concern that expanded discovery would force settlements forreasons and on terms that related more to the costs of discovery than to the merits of thecase, a concern raised frequently in the context of electronic discovery.”

“When we were in law school,” Speros says, “we would say that if you can’t argue the facts,argue law. If you can’t argue law, argue policy. That, under e-discovery, has gone out thewindow. All we’re arguing about is the evidence itself.”

That may be the best reason of all, Speros argues, for law firms to adapt e-discovery strate-gies and technologies that will help them navigate their way successfully and efficientlythrough the non-stop blizzard of electronic data that has all but barred the way to successfullitigation.

A thoughtful evidence management approach brings the discussion back to the merits ofthe case. Appropriately managed evidence processes redirect litigation and help parties tofocus more effectively on resolving the matter at hand. By optimizing the entire processwith a single source TEM solution, law firms can save clients time and money, and poten-tially change a litigation outcome.

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About Merrill CorporationFounded in 1968 and headquartered in St. Paul, Minn., Merrill Corporation (www.merrillcorp.com) is a leading provider of outsourcing solutions for complex businesscommunication and information management. Merrill’s services include document anddata management, litigation support, branded communication programs, fulfillment,imaging and printing. Merrill targets markets including the legal, financial services, insuranceand real estate industries. With more than 6,300 people in over 70 domestic and 15 international locations, Merrill empowers the communications of the world’s leadingcompanies.

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