Gabe Acevedo Rocks!

Sometimes it is truly the smallest things that have the greatest impact.  Thank you Gabe for forwarding me the Fios white paper on 26(g).  You are very kind.  My appreciation and best wishes to you today!

Rule 26(g) Certifications

Okay, nothing is more aggravating than being locked out of something. Especially when you want to review a white paper.  This is because I’m a Yahoo! email werkingurl, and someone with a bona-fide corporate email account address will need to download the Fios whitepaper on Rule 26(g) certifications and forward it to me, please.

Native Reviews, Document Productions & Enterprise Content Management: Cost Effective Approaches to e-Discovery

The whole world is in economic turmoil, perhaps the worst global depression ever recorded. Tens of thousands of legal jobs have recently been lost. We will start seeing an onslaught of litigation because of all the money lost, the contracts that went south, and from lawsuits brought by all the workers who were are laid off as a direct result of the securitization meltdown of our financial system. Many of these lawsuits will be brought by thousands of Defined Benefit Plans and other state and municipal governmental agencies who were sold junk derivatives and collateralized debt obligations derived from the subprime-credit rating agency fiasco. A bona-fide lawsuit feeding frenzy is on the horizon. The courts are going to be the only remedy for all of these financial participants because you cannot dump these toxic assets from your balance sheets (even by filing bankruptcy to shed it because the holders of these securities contracts can go after whatever liquid financial instruments that remain in your portfolio[1]). Lawsuits are going to be the only option for many involved.

For these reasons, everyone is going to be hard-pressed to reign-in the costs of litigation more than ever before. And electronic discovery (“e-Discovery”) is one of the most expensive cost components to the parties in litigation today. KPMG estimates that first level document review encompasses anywhere between 58% and 90% of the total litigation costs. (See “Cutting to the Document Review Chase,” American Bar Association Newsletter, Business Law Today, Vol. 18, No. 2, Nov.-Dec. 2008).

But it doesn’t have to be this expensive, and it shouldn’t be. Litigants are asking their counsel to investigate the feasibility of incorporating their own enterprise content management (ECM) solutions with their e-Discovery obligations during litigations. This essentially is called native document reviews and productions.

Why are we processing ESI anyway?

To understand how using my client’s ECM solutions will lower e-Discovery costs, let’s look at the why’s and wherefore’s of collecting electronically stored information (ESI) for review. We will then examine what happens to that data under the current EDRM model. And we will close our review by looking at how utilizing an ECM system to facilitate both native document reviews and native document productions can be achieved in a secured environment and will reduce a significant portion of the out-of-pocket costs associated with e-Discovery.

There is nothing more ubiquitous than electronic files. Massive quantities, terabytes and petabytes, of ESI are being collected for the review process. It is a large and costly proposition.

A document review can either be conducted by reviewing the native documents themselves through internet hosted environments or with stand alone document review software applications. Otherwise, all the data that is collected will be “processed” for loading into a review software or database for the document review. The client incurs significant costs during this processing of their data.

Processing involves taking structured native data (Word documents, emails, spreadsheets) and all the unstructured content (faxes and other paper documents that have been digitized), and extracts the data, metadata and properties and reproduces it as separate image and text files that can be loaded into a litigation support database. These databases are used for their ability to assign bates numbering and a certain amount of foldering and tagging functionality for review purposes. However, the litigation support databases were not designed originally to house massive amounts of electronic files. Enterprise class modifications are being incorporated that improves their functionality. However, they can become very slow and cumbersome to navigate, tag and sort through with large datasets loaded, and there are other search restrictions that may make the databases unfeasible. You are also limited to conducting straight Boolean, proximity and nested searches.  The  review software that processes the data allows you to use clustering analysis technology, but this technology is available elsewhere that does not require the data to be processed.

The “processing” method fails because you are essentially stripping the native file of its properties.  Who can look you at you straight-faced and tell you that is a best practices model?  Using OCR to recreate data and metadata after extraction has high documented error rates of up to 50% during document reviews. (See id: “Cutting to the Document Review Chase,” American Bar Association Newsletter, Business Law Today, Vol. 18, No. 2, Nov.-Dec. 2008). And it is expensive. Processing costs range on average between $1,000 to $1,700 per gigabyte.

Because our courts are mandating that we demonstrate both a legally defensible and repeatable methodology for producing e-Discovery, at the very least, I recommend considering all the native review tools that are available today in the market that will facilitate first pass document reviews.  For instance, there is a relatively new indexing tool that is being ignored, Microsoft’s Indexing Server, the Search Server Express 2008, that provides enterprise-class search and indexing capabilities for free.  If you were to migrate data to the MSIDXS and crawl the data, you would have a much more reliable search experience that searches across Exchange platforms and supports Lotus Notes.  The MSIDXS supports the SQL query language which is well known and makes it very easy to use the Indexing Server.  The MSIDXS will index all data from the files, folders and web sites.

The entire section of the EDRM model on processing a document collection needs to be rexamined.  It is a wasteful use of resources and produces inaccurate results.  Any system that demonstrates error rates of up to 50% in the review process must be rexamined.

Being able to migrate data from an existing ECM system into a review platform that allows a litigant to reduce its overall out-of-pocket costs associated with the document review and production is a system that should be looked into. Through adoption of ECM platforms, MSIDX, SharePoint, or other hosted cloud repositories or extranets for the productions, will bring document productions into the 21st Century.

Recommendation for Native Reviews

I recommend native reviews that do not process data for the simple reasons of cost and defensibility. If the content is already structured, it can and should be indexed.  We need to use the myriad of software applications and utilities available to facilitate culling down the amount of e-Discovery required for the document reviews and productions in a constructive way, on data that has not been comprimised through the OCR process. The technologies are quite promising. We now have options for robust review tools that offer clustering analysis and data mining, and provide for efficient high level filtering and foldering of data.

ECM provides a controlled data environment. Autonomy has just released a repository for SharePoint that looks promising, and Kroll has introduced a brand new review platform that is used specifically in conjunction with SharePoint. There is no doubt that using ECM with e-Discovery will reduce the overall out-of-pocket costs of litigations today.  But we need these tools to be able to migrate the original data without processing it.

The Answers

What are the answers? No two document productions are going to be alike. And all litigations may not require a full blown ECM solution or analytical review tool when the case circumstances would allow for a simple swap of a CD Rom to suffice. But, understand, the courts clearly want cooperation between the parties today during the discovery process. Mancia v. Mayflower Textile Services Co., 253 F.R.D. 354 (D. Md. 2008). So, I am using this downtime to familiarize myself with the various document review tools and production platforms available. I’m exploring the cloud solutions. If I can recommend incorporating my client’s ECM platform with a document review or production, I will. You might find I have a very happy client who was able to save a substantial amount of money in their discovery costs.

Julie Wade is a Litigation Support Analyst/PM Consultant in Houston, Texas. You can email Julie at acedparalegal@yahoo.com.

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[1] See Sections 555 (securities contracts), 556 (commodity or forward contracts), 559 (repurchase agreements) and 560 (swap agreements) of the Bankruptcy Code.

Derivatives, the Financial Tsunami & the 2005 Bankruptcy Reform Act

Not everyone knows that Wall Street petitioned the Bush Administration pretty hard during the legislative process leading to the enactment of the 2005 Bankruptcy Reform Act.  I’m surprised not much media attention has been given to this.

However, this has got to be one of the most profound moments in our nation’s history.  This is when Wall Street lobbied our Congress into carving out a class of parties who are protected (e.g., themselves) under the Bankruptcy Code’s financial transaction provisions.

To give you some background, back in 2005, we were living in the hey-day of our real estate bubble.  These wall street investment houses and our bankers wanted some protection if anyone should want to bail out from underneath a “securities transaction” or “swap” that they were holding.

So they lobbied Congress to enact a few scant paragraphs, Secions 555 (securities contracts), 556 (commodity or forward contracts), 559 (repurchase agreements) and 560 (swap agreements) of the 2005 Bankruptcy Code Amendment, that essentially says that if a party to a security transaction or swap files for bankruptcy, the non-affiliate holder of those securities can march right to the front of the line of all creditors (including secured creditors) and they can “foreclose” on whatever financial properties of the estate that are still liquid as collateral damages.  Can you believe this?

So, the Trustee can absolutely do nothing but sit back and watch as the estate is robbed of any intrinsic value left by the holders of the financial tsunami instruments, the swaps, derivatives and all the weather derivative holders too (yes, ENRON created those).  These are the financial instruments that were hedged over and again, then re-arbitraged five or six times more, and all were wrapped up, securitized and collateralized, before being traunched into AAA ratings.

To get back to the point where this has tail-spinned around and bit these bankers in their backside, is where we are today. For you see, these are the same bankers who are today hard-pressed to dump their own securitization assets that they lobbied Congress so hard in 2005 to prevent from occuring.  They can’t dump this from their balance sheets because language exists in the master netting agreements that would put them in default and their good assets would be subject to seizure.  They can’t dump it in Bankruptcy because of the 2005 Amendment to the Code that they lobbied for.  Or, can they?

If the government is going to take over the banks anyway, why doesn’t Congress just repeal the 2005 Bankruptcy Code Amendments, then we could get the U.S. Supreme Court, sua sponte, to void that Code as well because of unconstitutional due process considerations. The banks can then safely file bankruptcy, and the government receivers can transfer their bad assets off their books to the bad banks.  Then our lending institutions can quickly reorganize and re-emerge from the bankruptcy, all squeeky clean.

Could this work?  Well, another reason for the banks to do it this way is that all the future lawsuits and shareholder derivitive actions against them would be extinguished in the Bankruptcy filing as well.  Hum.