E-discovery in a challenging economy

Recent surveys confirm casual observation that lawsuits are a large and growing part of the U.S. economy. A variety of surveys indicate that anywhere from half to nearly 90 percent of businesses, depending on the size and field, were faced with at least one in the past year. Yet many organizations remain completely unprepared.

It’s not easy to get everything right for e-discovery, especially in a tumultuous economy, but it’s not impossible either. Take the case of a natural gas and electric utility company based in the Southeast. It serves more than a million customers in about 100 different counties. Since it is in a highly regulated and frequently litigated industry, the company decided to take the approach of being prepared. After speaking to some leading analysts, the company focused on ZyIMAGE eDiscovery from ZyLAB as the best match in terms of capability and cost.

The company began deployment in spring 2009, and by fall it was operational. Aside from taking the positive step of seeking expert advice, the company also did not wait until an issue was pressing. The deployment of an e-discovery solution was part of a strategic plan to be able to respond in a timely fashion to those issues that might arise. Utilities are subject to many regulations, including financial and environmental, and the company took a realistic approach in getting a solution in place. With e-discovery technology available in-house, the company would be ready to respond.

Complex search requirements are a hallmark of e-discovery, and non-specialized search tools such as Web search engines cannot do the job, according to Johannes Scholtes, CEO of ZyLAB. "The ability to carry out fuzzy searches, wildcard searches and hierarchical searches with nested terms is generally beyond such products," Scholtes says. "In addition, they are not fast enough to deal with the huge volumes of files associated with e-discovery."

ZyINDEX indexes attachments, e-mails and documents in hundreds of formats as well as in many languages. "Technology we have developed over the last two decades provides a very robust solution for these searches," Scholtes adds.

Finding the haystack

Not every company is looking ahead and being prepared. Economic turmoil itself has made planning difficult and has brought on a number of interrelated outcomes with respect to managing data.

"Bankruptcy, mergers and acquisitions, and downsizing all lead to the same basic result," says Brett Tarr, general counsel for eMag Solutions, which provides e-discovery services for litigation, regulation and compliance. "There is a need to find data, but an uncertainty about where it is."

One approach he recommends to prevent confusion is to create a formal data map that shows the physical flow of information through the organization. "In a bank, for example, the CFO might not still be there, but the data map would show whom he communicated with. You can find those people and get 90 percent of what you need." The map should be created as part of normal business operations and updated regularly. The map can save time when e-discovery is carried out, by eliminating the need to search certain devices.

"If the e-discovery is related to an HR case, and all that data is on one server," Tarr explains, "you don’t need to search all the others." Saving only the required and appropriate information is also important. "The organization should develop strategies for setting up retention policies for e-mail archiving and other data, so that the volume is minimized," he adds.

In addition, images should be created of all the devices used by individuals prior to their departure from the organization. "In certain types of bankruptcies related to an individual’s conduct, you might find that a lot of files had been copied from a directory to a portable hard drive, or that information had been deleted," says Tarr. "Once the image is preserved, it can be used for business continuity as well as legal purposes." It’s important, however, to make sure the information is captured so that it is forensically preserved.

Trouble ahead

Although the financial crisis has retreated somewhat as compared to a year ago, the lawsuits are just gathering strength. "A lot of what happened during this time was fraudulent," says Mary Mack, corporate technology counsel for Fios Inc., "and if not outright fraud, was highly questionable and will lead to lawsuits."

The subprime mortgages and credit default swaps are still having a major impact. "Many non-regulated industries are also dealing in these," says Mack, "which is bringing investigations into relatively untamed environments." And the list of prospective plaintiffs is long, ranging from class action suits by consumers to shareholder complaints. Companies, if still in existence, will need to scramble to gather their due diligence to defend themselves.

E-discovery in those cases will center on what information was known and when it was known. "Companies that suspect an investigation is imminent need to preserve data and discuss cost-effective ways to manage the crisis," Mack points out. Fios has embedded Content Analyst Technology (CAAT) from Content Analyst in its review platform, Fios Prevail, to search unstructured text to determine overall content and concepts without having to select specific terms early in the process. In addition, Fios trains review teams to use the search methodologies and tools for limiting the results to the most relevant documents.

A number of trends sparked by the current economic and political climate are increasing the difficulty of responding to e-discovery requests. One is that the courts are considering an increasingly wide range of information sources as fair game.

"In one recent case," says Mack, "stock traders were indicted not due to e-mail from any of the normal archived systems, but due to an e-mail sent to an acquaintance, third-party account." The net for e-discovery is getting bigger, she says, and more technologies such as instant messages are available that provide clues about when information was known or acted on.

A second trend is the increased complexity of organizations and their associated information system after a failing company is acquired by a new owner. And finally, prosecution is becoming more aggressive in response to public outrage over egregious violations. Fewer judges are showing flexibility in their rulings regarding the information to be produced and the timing of the response.

The bottom line, Mack emphasizes, is that companies cannot afford to ignore the issue of e-discovery. They should begin with a risk assessment that indicates where they might be the most vulnerable, move quickly to a defensible, documented records management and preservation policy, and support it with appropriate internal and third-party resources.