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.

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.

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.

Bigger Isn’t Always Better When It Comes to Outside Counsel

By Ruth E. Piller, Litigation News Associate Editor

Corporate legal clients once again seem to be developing an affinity for small law firms—notwithstanding the merger mania of recent years and the perception that large corporations want only to hire megafirms. With increasing frequency, the chief legal officers of leading corporations are now retaining small law firms and even solo practitioners.

“I do believe that we are seeing an increase in inside counsel using smaller, boutique firms,” says Horace W. Jordan Jr., Lake Forest, IL, cochair of the Section of Litigation’s Corporate Counsel Committee. Jordan, who is general counsel for an equipment leasing company, believes that two dynamics are responsible for this change: “the billable hour and a feeling that the smaller firm might have more flexibility in both arranging billings and understanding the client and its business.”

For more see ABA.com.

Defuse Firm Fear and Disarm EDD Vendors

By Monica Bay
Law Technology News
October 2, 2007

There’s no question about it, electronic data discovery is generating huge revenues for vendors and gigantic headaches for corporations and their lawyers. There’s outright fear and confusion as everybody struggles to understand — and corral — this critical litigation technology.

When Law Technology News first introduced our EDD Showcases in 2002, we scoured the Web and came up with 55 vendors. Just five years later, there are more than 600 providers. And the money is breathtaking: The 2007 Socha/Gelbmann EDD Survey, released in August, pronounced that EDD is now a $2 billion business — that will double by 2009.

For more see law.com.

Nobody Loves a Lawyer

by Caitlin Liu    Sep 26 2007

That’s particularly true of big companies.  Most of them fired an outside counsel in the last 18 months, and those that didn’t often wish they had.  Unhappy with your lawyer?  You’re not alone.  Most of America’s largest companies ousted at least one of their outside counsel in the last 18 months, and only a third like their primary law firm well enough to recommend it to someone else, a recent survey shows.

And with attorney fees spiraling to heart-stopping new heights-corporate legal bills have nearly doubled in the last five years and law firms now pay just-out-of-school associates $160,000 a year-corporate America’s bile-spitting may only get worse.

For the rest of this well-researched and provocative article, see Portfolio.com.

Why Legal Hold Management is an Important Internal Control — – Can You Test Yours?

Every organization needs an auditable, centralized process for tracking legal holds, yet most admittedly lack good controls in this area.  Processes are not comprehensive and properly coordinated through proper policy development and training. We provide a few reasons here for that somewhat lofty statement, but this important topic deserves much deeper analysis.

Legal hold management has become a focal point since the passage of the amendments to the Federal Rules of Civil Procedure last year, but the duty to preserve in the face of known or anticipated litigation has always existed at common law.  The new rules are procedural and merely speak to the consequences that could flow when an organization cannot demonstrate that it has procedures in place to suspend the routine disposition of information.  In 2002, following the Arthur Andersen debacle, the Sarbanes Oxley amendments included changes to the Federal Obstruction of Justice Law, exposing individuals up to 20 years behind bars for the intentional destruction or concealment of information relative to pending or “contemplated” federal proceedings.  Effective compliance with the Federal Rules of Civil Procedure and the Federal Obstruction of Justice Law is unattainable without an enforceable and auditable records and information management program.

The use of Microsoft Excel or Access is a fine interim measure to track legal holds and preserve a record that individuals were notified to suspend the routine destruction or disposition of information.  Many companies do no more than this. In large organizations, or even smaller entities that have regular litigation exposure, however, a static repository of legal hold notices simply is not enough.  This is not an argument in favor of capital investment in a clunky new IT system (with software licensing and all the trimmings) for litigation hold management.  The starting point is having an understandable policy and proper employee training. 

Substantive criminal and civil laws necessitate action when an organization is on actual or constructive notice of legal or regulatory problem.  The need to provide notice of hold instructions occurs well before outside counsel is retained to represent a company.  A database or spreadsheet that merely tracks litigation holds but does not provide a real-time lens into an organization’s litigation profile will present difficulties.  A system must be accessible to and regularly updated by outside and inside litigation counsel, or whoever is charged with oversight of litigation at a company.  Like reserves management and analysis for FSAS 5, litigation hold management must be part of comprehensive litigation management procedures. However counsel tracks litigation, if at all, they must track holds in perfect lockstep with the opening and closing of litigation files. 

Your organization might already have license to use MS SharePoint or other applications with collaborative tools that can be configured inexpensively using to establish a platform that inside and outside counsel may use to access and track critical litigation data.  A law department you should have no problem getting adequate support and funding to create a system that does not require capital investment.  The key, however, remains in the policy development training, and training lawyers is not easy. 

Wanted: A Silver Bullet Formula for Effective Corporate Policies for Email Backup Tape Storage and Rotation

Email backup tape rotation (and related issues concerning over-retention of electronically stored information) is the most complex records and information management challenges organizations face today.

Backup tapes should be used only for disaster recovery, but many organizations still use those media for archives, retention or storage, with a trend toward increased use of archive storage technologies.  Archiving does not solve the information lifecycle challenges organizations face and the more information retained the more that is subject to collateral legal disclovery. 

Legal/compliance departments must be in lockstep with IT/RIM departments in terms of development and enforcement of policy and procedures concerning backup tapes. Flawless execution on litigation holds is essential to mitigation of legal and financial risk.

This is a take-no-prisoner compliance area and courts are not accepting the “keystone cops” defense anymore.  All organizations need to tighten up and audit their procedures for backup tape rotation, establish high-level catalogues/inventories of existing tapes; or develop policy and procedures if they have no policy and procedures in place (ASAP). Keeping everything is not a good alternative, and once you access information on email backup tapes, for whatever reason, it is difficult to argue in court that you cannot produce information from those tapes on the basis that the ESI is not reasonably accessible.

New Study Says Average-size Organization now has over 250 TB of Storage Space for Archive-related Content

The time has come for organizations to invest the time and resources needed to have policies and procedures in place for effective information lifecycle management. The risk and cost of the status quo is becoming increasingly prohibitive.

TheInfoPro announced that about 12 percent of Fortune 1000 consider archiving as one of their top storage initiatives, and 25 percent listed poor archiving capabilities as one of the key reasons for storage growth. The latest TIP Wave Storage Study finds that an average enterprise has over 250 TB of storage space dedicated to archive-related content.

See Tekrati — The Research Analyst Reporter.

Judges Rule on Hard-to-Discover Data

By Ronni Abramson
Fulton County Daily Report
May 10, 2007

Federal judges have published opinions for more than 50 e-discovery disputes since the landmark amendments to the Federal Rules of Civil Procedure governing the discovery of electronically stored information went into effect on Dec. 1, 2006. These cases give — in almost real time — valuable insight into how judges are interpreting the amendments. These cases provide direction on how to handle the identification, preservation, collection, review and production of ESI in litigation going forward.

For more see law.com.