CHIEF LEGAL OFFICERS PUTTING HIGH PRIORITY ON RECORDS AND INFORMATION MANAGEMENT COMPLIANCE PROGRAMS FOR 2008

91% of corporate counsel view records management compliance as important, but 75% still lack auditable standards for e-discovery processes

WEST ORANGE, N.J. – Nov. 1, 2007 – Since the new Federal Rules of Civil Procedure took effect last year, organizations have been looking to outside resources for more assistance in managing information capture and production demands. But a recent survey of chief legal officers from over 100 organizations indicates disappointment with the quality of those services and marginal progress with improving records and information management practices.

“The professional services market is fixated on legal discovery response needs, but not nearly enough attention has being given to the root cause of the information management crisis. E-discovery is a symptom of a more serious problem. More concentration on policy development, business process improvement, and education will enable companies to reduce the overall volume of information subject to discovery in the first place. The costs will continue to mount until leaders decide to get proactive. This is a great opportunity to add value to the bottom line,” says Lexakos founder Rick Wolf. 

In its just-released “Chief Legal Officer 2008 Strategic Planning Survey,” Lexakos asked law department leaders about plans to allocate resources to litigation support over the next year. The findings are telling. While 90% of companies expect their operating budget to increase or stay about the same in 2008, 86% do not plan to expand internal staff dedicated to litigation support. “These data suggest the trend of outsourced litigation support services will continue next year,” says Wolf. “While this might appear to be a boon for the legal services industry, organizations want innovation and better service, and the competition to win business should be high in 2008.” 

The study shows that 86.5% rank as important the need for “controlling outside counsel legal spend and reducing the number of law firms who represent our organization.” Only 21% “trust outside counsel to manage costs and choose the best alternatives for document review,” while 54% “do not believe outside counsel has a vested interest in devising cost-effective document review strategies.” These results are a wake-up call for law firms and e-discovery vendors.   

The study also asks chief legal officers key questions regarding their preparedness for the upcoming changes to the Federal Rules of Evidence and the doctrine of inadvertent waiver.

Lexakos is a business advisory group serving both the professional services industry and corporate legal community on governance, compliance, and risk management.


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Morgan Stanley May Face Wave of Suits After Admitting It Withheld E-Mail Evidence

As predicted in an earlier post on The Datakos Blawg titled “What is Happening to Morgan Stanley Could Happen to You,” Morgan Stanley is beginning to feel the ripple effect of its problems with email backup tape maintenance and controls.  The Daily Business Review reports “[a]ttorneys say they are gearing up to file hundreds of lawsuits against Morgan Stanley for allegedly hiding evidence from clients who filed arbitration claims.” 

 The residual effects of a bad outcome in a case of poor records management can be felt for many years to come.  For this reason, corporate leaders will have a difficult time avoiding any longer the need to invest and make a concerted effort to improve records and information management compliance.  The rationale that a bad event stemming from records management deficiencies is a “one off” or “unlikely to recur” simply will not cut it.  Once an organization gets sanctioned for signficant records management flaws, expect collateral attack from former litigants and regulators, who will attempt to reopen settlements and adjudications where evidence is perceived to have been withheld or carelessly destroyed.


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Hundreds of Key Oracle Records Allegedly Withheld From Plaintiffs

In recently unsealed documents, a federal insider trading and shareholder fraud suit alleges that hundreds of e-mails and financial records, and even audio interviews with Oracle Corp. CEO Larry Ellison, vanished or were improperly withheld from plaintiffs.

Lawyers for Oracle have strenuously denied the accusations, contained in thousands of pages of documents unsealed at the request of The National Law Journal.

Now, a showdown over the plaintiffs’ request for default judgment as a sanction for alleged document destruction, as well as motions on both sides for summary judgment, looms in a Nov. 16 hearing in U.S. District Court in San Francisco.

For more see law.com.

Two Are Sentenced to 5 Years in Pornographic Spam Case

PHOENIX, Oct. 13 (AP) – Two men who sent millions of unsolicited pornographic e-mail messages have been sentenced to more than five years in federal prison as part of a prosecution under a federal antispam law, officials from the Department of Justice said Friday.

The men, Jeffrey A. Kilbride of Venice, Calif., and James R. Schaffer of Paradise Valley, Ariz., bought lists of e-mail addresses and sent the owners of those addresses links to pornographic Web sites, prosecutors said.

For more see NewYorkTimes.com.

Banks claim credit card breach affected 94 million accounts

By Ross Kerber The Boston Globe

More than 94 million accounts were affected in the theft of personal data from TJX, a banking group has alleged in court filings, more than twice as many accounts as the retailer had said were affected in what was already the largest data breach in history.

The data breach affected about 65 million Visa account numbers and about 29 million MasterCard numbers, according to the court filing, which was made late Tuesday by a group of banks suing TJX over the costs associated with the breach. The banks cited sealed testimony taken from officials at the two largest credit card networks. A Visa official also put fraud losses to banks and other institutions that issued the cards at between $68 million and $83 million on Visa accounts alone, the filing states, the most specific estimate of losses to date.

For more see InternationalHeraldTribune.com.

Spam Levels Reach All-Time High Percentages

Spam levels reached an all-time high at 95% of all e-mails this past quarter, according to a new report by Commtouch.  These staggering figures will cause organizations to struggle more than ever in finding email important for legal or business purposes.  The challenge of isolating, securing and processing privileged, relevant and critical business information from among everything else is getting more costly and risky each day.

For more on the report titled “Email Threats Trend Report for the third quarter of 2007,” see DM.com.  The report found that as image spam declined, new kinds of attachment spam such as PDF and Excel spam increased. Pharmaceuticals and sexual enhancers were the most popular spam topics, at 30% and 23%, respectively.

E-discovery law a boon for lawyers

By Ellen Messmer, Network World, 10/19/07  

New regulations governing the storage and management of electronic data that might be needed in federal court actions has an increasing number of organization turning to outside counsel for help, according to a new study.  An annual survey about litigation matters asked 303 corporate lawyers about the impact of the e-discovery law that went into effect last year. 

The e-discovery law is an amendment to the Federal Rules of Civil Procedure related to finding and managing electronically stored information that might be relevant in a legal dispute in federal court. The new law requires processes and technologies to be in place to do e-discovery and to stop any automated or regular purging of relevant electronically stored information at the first sign that a company might be a party to a lawsuit, even before the suit is filed. The law also requires opposing parties to discuss e-discovery issues within 120 days of a lawsuit’s filing.

The fourth annual “Litigation Trends Survey Findings” conducted by Fulbright & Jaworski L.L.P, a global law firm based in Austin, Texas, found that corporate lawyers — over two-thirds based in the United States and the rest mainly in Britain — cited a big jump in use of outside vendors and outside law firms specializing in the e-discovery field. The industry sectors primarily represented are financial services, technology/ communications, manufacturing, healthcare, energy and retail. 

Whereas 37% of the in-house corporate lawyers in the United States had used outside e-discovery vendors last year to help with e-discovery, that number jumped to 51% this year. With U.K.-based lawyers, that number jumped from 8% in 2006 to 71% this year. The need to call on an outside law firm with “special technical expertise in e-discovery issues” rose from 26% last year to 30% for the U.S. corporations represented, and 17% to 32% for the U.K. companies. As a whole, 17% of those answering the survey said they have retained or are considering retaining national or regional counsel specifically for e-discovery issues that arise.

For more see Network World.com.