'Save As Privileged' ' The Next e-Discovery Answer?

On Sept. 20, 2005, the Judicial Conference Committee on Rules of Practice and Procedure sent the proposed electronic discovery amendments to the Federal Rules to the Supreme Court for its consideration. The Committee unanimously approved the proposed amendments to Civil Rules 16, 26(a), 16(f), 33, 34 and 45 and Form 35.

In general, the proposed rules will increase awareness of the discovery issues that are unique to electronic discovery and will require that the lawyers, the parties and the court focus early on the format in which electronic data will be produced in federal actions. Also, absent unusual circumstances, the new rules will protect parties from sanctions for failure to produce electronic data lost by routine, good faith loss of data and will protect parties from the need to produce inaccessible data under some circumstances.

No Surprise

While this all seems newsworthy, these changes have been in the works for some time and are creating technical challenges that will require a big change in behavior. Take for example a recent Sedona meeting in which records retention and e-mail were heavily discussed, including one corporation saying they have added a “Save as Privileged” to their e-mail system.

Many corporate documents, including those created in word processing and spreadsheet programs, are saved on enterprise network systems using a document management (DM) system, which enables users to categorize the document by fields such as title, author, client/matter number and even privileged. Unfortunately, no such system currently exists for e-mail. The result is oftentimes to conclude that all e-mail needs to be saved, and when retrieval and review for e-discovery becomes necessary, the scope and complexity of this task falls to the IT department.

Part of the problem is, of course, the complex variety of record retention requirements facing corporations. All business must save records relating to tax and employment issues and records, and there are numerous statutes and regulations (at all levels of government from local to federal) that mandate the retention of documents for prescribed periods of time. In addition, specific professions or industries may have their own additional requirements. For example, broker-dealers regulated by the U.S. Securities and Exchange Act must keep all records relating to a project for 3 years as must certain government contractors; healthcare organizations are subject to regulations spawned by the Health Insurance Portability and Accountability Act (HIPAA); and the energy industry must comply not only with the SEC regulations but those set by the Federal Trade Commission (FTC) and through the Foreign Corrupt Practices Act as well.

The Answer?

So, that begs two questions: “Can 'Save as Privileged' really solve the problem?” and “Does e-mail constitute a 'record'?” The latter question may be moot since an industry analysis by IDC in 2004 estimated that 60% of all business-critical information is stored within corporate messaging systems, up from 33% in 1999. And given the generic approach to wholesale e-mail archiving, the cost of responding to discovery directed at those archive stores can be exorbitant.

Take, for example, the case of Rowe Entertainment Inc. vs. The William Morris Agency Inc., 205 F.R.D. 421 (S.D.N.Y. 2002), where the court ordered William Morris to conduct a review of their e-mails for privileged and confidential information prior to producing them pursuant to a discovery request. The defendants estimated the review would take 2 years and cost $500,000.

Is this an unusual example? Hardly. Estimates of the amount of corporate e-mail being generated vary but the E-mail Archiving Market Research Report by the Radicati Group found that the average user processed 125 e-mails per day, each averaging 40 KB without attachments. The report concluded that each user handles approximately 19.5 MB of data per day, and that figure will grow to 45 MB per day by 2009. The result is that a company with 1000 e-mail users processes 19.5 GB per day, 97.5 GB per week and 390 GB per month. A company with 3000 employees on their e-mail system could generate a terabyte of message traffic per year. And, when you factor in industry estimates that corporate e-mail is growing at a rate of 29% annually and the physical size of those e-mails is rising by more than 90% every year due to the increasing number of attachments, the potential for staggering discovery review costs is obvious.

Many companies deal with this deluge of information by mandating that users periodically clean out their mail boxes. In reality the users save their mail to personal archive (.pst or .nsf) files, and many users copy those personal e-mail archive files to network drives as a backup. Enterprise-wide storage systems may then be capturing multiple copies of the same records in redundant .pst files as well as in network stores. Not only do these eventually take up an increasing amount of storage space (some industry experts estimate that e-mail backups may take up as much as 30% of a typical enterprise network volume) but retrieving and reviewing this wide-spread “archival” system for a discovery response becomes a daunting task that can only be performed by the IT department, which further increases the cost to the client by devoting massive amounts of IT staff time to such a task.

Is There a Solution?

Maybe.

There are two camps out there ' one is to save everything (the standard e-mail archiving approach) and sort it out later (as discussed above); the other is to tackle the issue of DM by enabling user-declaration or auto-declaration (a new concept that relies on the technology to automatically categorize e-mail based on its content and pre-defined rules) when sending or receiving e-mails. Alas, “Save as Privileged,” where an author or the technology declares the e-mail as privileged communication and thereby subject to different retention and discovery rules. With a “Save as Privileged” approach, best practice is to declare these e-mails as categorized records early, with the most fail-safe approach being to eliminate personal e-mail storage from the desktop and into a central repository.

And, as I stated earlier, there are some early indications of movement in this direction. The company that spoke at the Sedona meeting currently utilizes an interface with their e-mail system that prompts a sender when they hit the “Send” key in Outlook to indicate whether the e-mail should be stored as a record or labeled as privileged prior to it being sent. In addition, the electronic mail and electronic documents policy for municipal employees in Salt Lake City states that:

Primary responsibility for retention of important e-mail rests with the sender. As such, when a person attempts to send an e-mail, a dialogue box will ask the sender to mark whether the e-mail is (1) program, policy, or decision-making correspondence, (2) confidential (eg, attorney-client privileged), or (3) other. If an e-mail is marked as policy, program, or decision-making, or as confidential, a copy will be automatically saved.

While this policy may be useful later for e-discovery, what happens to the non-designated e-mails? How does this fit into the overall records retention plan?

Preserve and Collect

Regardless of which camp, when it comes to discovery for litigation or investigation, a corporation needs to address preservation and collection wherever the relevant evidence resides. The “Save as Privileged” approach may be a good start, but it won't necessarily solve the issues surrounding e-mails and other communication sent from PDAs, voice mails, home computers or other non-traditional mediums. And, for defensibility, it is critical to not consider e-mail a record class unto itself; rather, it is a medium.

A successful enterprise will define and apply a consistent business process for retention and discovery regardless of medium (e-mail, electronic document or paper). This process will help address how electronic files are stored throughout the enterprise, how they can be protected in the event of a preservation obligation, and how they will be retrieved when required for discovery or investigation. E-mail archiving systems or DM systems can help but cannot alone solve these issues. A solid business-oriented approach holds the key for reducing the time, costs and burdens associated with the electronic discovery process.

On Sept. 20, 2005, the Judicial Conference Committee on Rules of Practice and Procedure sent the proposed electronic discovery amendments to the Federal Rules to the Supreme Court for its consideration. The Committee unanimously approved the proposed amendments to Civil Rules 16, 26(a), 16(f), 33, 34 and 45 and Form 35.

In general, the proposed rules will increase awareness of the discovery issues that are unique to electronic discovery and will require that the lawyers, the parties and the court focus early on the format in which electronic data will be produced in federal actions. Also, absent unusual circumstances, the new rules will protect parties from sanctions for failure to produce electronic data lost by routine, good faith loss of data and will protect parties from the need to produce inaccessible data under some circumstances.

No Surprise

While this all seems newsworthy, these changes have been in the works for some time and are creating technical challenges that will require a big change in behavior. Take for example a recent Sedona meeting in which records retention and e-mail were heavily discussed, including one corporation saying they have added a “Save as Privileged” to their e-mail system.

Many corporate documents, including those created in word processing and spreadsheet programs, are saved on enterprise network systems using a document management (DM) system, which enables users to categorize the document by fields such as title, author, client/matter number and even privileged. Unfortunately, no such system currently exists for e-mail. The result is oftentimes to conclude that all e-mail needs to be saved, and when retrieval and review for e-discovery becomes necessary, the scope and complexity of this task falls to the IT department.

Part of the problem is, of course, the complex variety of record retention requirements facing corporations. All business must save records relating to tax and employment issues and records, and there are numerous statutes and regulations (at all levels of government from local to federal) that mandate the retention of documents for prescribed periods of time. In addition, specific professions or industries may have their own additional requirements. For example, broker-dealers regulated by the U.S. Securities and Exchange Act must keep all records relating to a project for 3 years as must certain government contractors; healthcare organizations are subject to regulations spawned by the Health Insurance Portability and Accountability Act (HIPAA); and the energy industry must comply not only with the SEC regulations but those set by the Federal Trade Commission (FTC) and through the Foreign Corrupt Practices Act as well.

The Answer?

So, that begs two questions: “Can 'Save as Privileged' really solve the problem?” and “Does e-mail constitute a 'record'?” The latter question may be moot since an industry analysis by IDC in 2004 estimated that 60% of all business-critical information is stored within corporate messaging systems, up from 33% in 1999. And given the generic approach to wholesale e-mail archiving, the cost of responding to discovery directed at those archive stores can be exorbitant.

Take, for example, the case of Rowe Entertainment Inc. vs. The William Morris Agency Inc., 205 F.R.D. 421 (S.D.N.Y. 2002), where the court ordered William Morris to conduct a review of their e-mails for privileged and confidential information prior to producing them pursuant to a discovery request. The defendants estimated the review would take 2 years and cost $500,000.

Is this an unusual example? Hardly. Estimates of the amount of corporate e-mail being generated vary but the E-mail Archiving Market Research Report by the Radicati Group found that the average user processed 125 e-mails per day, each averaging 40 KB without attachments. The report concluded that each user handles approximately 19.5 MB of data per day, and that figure will grow to 45 MB per day by 2009. The result is that a company with 1000 e-mail users processes 19.5 GB per day, 97.5 GB per week and 390 GB per month. A company with 3000 employees on their e-mail system could generate a terabyte of message traffic per year. And, when you factor in industry estimates that corporate e-mail is growing at a rate of 29% annually and the physical size of those e-mails is rising by more than 90% every year due to the increasing number of attachments, the potential for staggering discovery review costs is obvious.

Many companies deal with this deluge of information by mandating that users periodically clean out their mail boxes. In reality the users save their mail to personal archive (.pst or .nsf) files, and many users copy those personal e-mail archive files to network drives as a backup. Enterprise-wide storage systems may then be capturing multiple copies of the same records in redundant .pst files as well as in network stores. Not only do these eventually take up an increasing amount of storage space (some industry experts estimate that e-mail backups may take up as much as 30% of a typical enterprise network volume) but retrieving and reviewing this wide-spread “archival” system for a discovery response becomes a daunting task that can only be performed by the IT department, which further increases the cost to the client by devoting massive amounts of IT staff time to such a task.

Is There a Solution?

Maybe.

There are two camps out there ' one is to save everything (the standard e-mail archiving approach) and sort it out later (as discussed above); the other is to tackle the issue of DM by enabling user-declaration or auto-declaration (a new concept that relies on the technology to automatically categorize e-mail based on its content and pre-defined rules) when sending or receiving e-mails. Alas, “Save as Privileged,” where an author or the technology declares the e-mail as privileged communication and thereby subject to different retention and discovery rules. With a “Save as Privileged” approach, best practice is to declare these e-mails as categorized records early, with the most fail-safe approach being to eliminate personal e-mail storage from the desktop and into a central repository.

And, as I stated earlier, there are some early indications of movement in this direction. The company that spoke at the Sedona meeting currently utilizes an interface with their e-mail system that prompts a sender when they hit the “Send” key in Outlook to indicate whether the e-mail should be stored as a record or labeled as privileged prior to it being sent. In addition, the electronic mail and electronic documents policy for municipal employees in Salt Lake City states that:

Primary responsibility for retention of important e-mail rests with the sender. As such, when a person attempts to send an e-mail, a dialogue box will ask the sender to mark whether the e-mail is (1) program, policy, or decision-making correspondence, (2) confidential (eg, attorney-client privileged), or (3) other. If an e-mail is marked as policy, program, or decision-making, or as confidential, a copy will be automatically saved.

While this policy may be useful later for e-discovery, what happens to the non-designated e-mails? How does this fit into the overall records retention plan?

Preserve and Collect

Regardless of which camp, when it comes to discovery for litigation or investigation, a corporation needs to address preservation and collection wherever the relevant evidence resides. The “Save as Privileged” approach may be a good start, but it won't necessarily solve the issues surrounding e-mails and other communication sent from PDAs, voice mails, home computers or other non-traditional mediums. And, for defensibility, it is critical to not consider e-mail a record class unto itself; rather, it is a medium.

A successful enterprise will define and apply a consistent business process for retention and discovery regardless of medium (e-mail, electronic document or paper). This process will help address how electronic files are stored throughout the enterprise, how they can be protected in the event of a preservation obligation, and how they will be retrieved when required for discovery or investigation. E-mail archiving systems or DM systems can help but cannot alone solve these issues. A solid business-oriented approach holds the key for reducing the time, costs and burdens associated with the electronic discovery process.