Tuesday, December 18, 2007
Friday, December 14, 2007
Now that December 1 has come and gone, and another set of amendments of the Federal Rules of Civil Procedure has become effective, time for a belated reminder that Bankruptcy Rule 9037 has been adopted. For those of you who, like me, have been too busy filing amended pleadings to replace outdated Official Forms and creating notice pleadings for small business case financial disclosures, it is time to turn your attention to 9037.
Rule 9037 mirrors many federal court local rules, and existing statutory law in many states, regarding the filing of record or other disclosure of individual identifying information such as social security numbers, year of birth, account numbers of financial accounts, and the names of minors. The reasons for the rule are obvious, but the the long-term implication for lawyers, commercial clients, and any user of "data-enabled" forms should not be overlooked, as the story below makes clear.
Posted by R. Lee Barrett at 1:28 PM
Thursday, December 13, 2007
To my surprise, the release of the Mitchell report is clearly pulling readers away from this site. Here is the link to the report.
As a matter of geeky interest, there are at least three instances where electronic documents are referred to. Apparently the investigators received 20,000 electronic documents from the Commissioner and from offices of the individual ball clubs. The Player's Association is reported to have declined to produce any documents, digital or otherwise. DLA Piper and FTI Consulting were hired to handle the electronic document review. Lucky Bastards.
In related news, my beloved Rangers (only slightly scarred in the report), still don't have any pitchers.
Posted by R. Lee Barrett at 5:11 PM
Wednesday, December 12, 2007
I have been sitting on this one a while, but when ALM and ABI picked up the story, decided it was worth a few electrons in this forum.
In at least the last 2 years, the Administrative Office of the U.S. Courts and the United States Trustee has been working on an initiative to develop and implement standards for the use of "smart forms" or "data enabled" forms for the use in debtor bankruptcy filings. According to a Request for Comments dated June 3, 2005 and submitted by the AOUSC and USTP, a data enabled or smart form is a .pdf document that is filled out on-line, and then "saved as a PDF file containing data tags that are not visible to the user, but which 'mark' each piece of data entered into the individual fields on the form with a tag."
What this really all means is that the information captured in a petition, schedules and presumably statement of financial affairs allows anyone with the right electronic toys to assemble and aggregate the information entered into each of the active fields in the smart form into a data base or other repository without having to re-type or manually re-process the information.
The ability to rapidly access and assemble this data can be invaluable to the courts, trustees, administrative personnel, and creditors. The concern is that the ability to rapidly access and assemble this data can be invaluable to otherwise disinterested third parties who may find other, potentially nefarious uses, of the information.
This initiative, originally set to kick in on October 17, 2005, has been subject to fits and starts without really gaining much momentum. The primary barrier seems to be the reluctance of vendors to dive into this project without the use of the "smart forms" made uniformly mandatory throughout bankruptcy courts. A September 23, 2005 Memorandum to bankruptcy petition preparation software companies included a sample "data enabled" petition, also lovingly referred to as Official Form B1.
Software providers were assured that CM/ECF "as-is" would accept data-enabled forms. Providers were also informed that the foundation for this project would be something called Adobe Acroform filed and value (F/V) tags. In the June 2005 call for comments, the AOUSC and the USTP noted that the PDF/A, the interim filing format in place for CM/ECF was supported by PDF v. 1.4, but that it did not follow the "current industry trend towards XML tags", which is supported in "PDF/A version 1.5 or higher". The gubment cites its desire to move in the opposite direction of the rest of the world in order to "ensure all CM/ECF PDFs are compatible with the long term archival of digital records." I don't know what this means either, but remember this because it adds to a later plot twist. From a vendor standpoint though, it sure sounds like the software vendors don't have the desire to expend time and resources to develop a software tool based on standards and a format that only a small segment of its customers will be using, that are not used by any other end-user, for a profession notorious for changing nothing until and unless forced to do so. Sort of the equivalent of making GM produce a car that runs on eggshell fuel, at a time when the government has not yet required chickens to lay eggs with shells on them.
An undated posting on the website of the AO's office regarding the proposal seems to confirm these suspicions. A significant case is made by the author of the posting, for an XMP - metadata approach; and by attribution to Marty Mohr of E-Z Filing, that an XML-type standard be adopted.
Clifford J. White III, who must have a largely thankless job, has championed the benefits of fast-forwarding the use of smart forms. In an April 26, 2006 statement to the House, White explained that the "data-enabled" function would assist the US Trustee in conducting studies mandated by BAPCPA. White explained that implementing the program would allow the Trustee to use the data or analyzing the means test, selecting cases for targeted debtor audits, conducting the aforementioned studies, reporting to Congress and processing cases more efficiently. White also stated that the use of data tags in the smart form could be saved into the "industry standard Portable Document Format", so that the resulting document has search able data. The April 2006 statement is silent as to the PDF/A v. XML issue.
In September 2006, the Advisory Committee on Bankruptcy Rules met to consider, among many other things, White's suggestion that the use of the smart forms be made mandatory. The minutes reflect that White provided copies of a letter to James Duff, Director of the Administrative Office indicating that the technical standards were "set", but that the software vendors weren't likely to get on board unless the use of the forms was made mandatory. At that time, the minutes reflect that only one of the vendors had indicated a willingness or ability to implement the forms. Peter G. McCabe, billed as secretary of the Standing Committee, got a golden star for the session by pointing out, according to the minutes, that the smart form is better viewed as a long-term solution for the data-gathering requirements, and further indicated his belief that there were still some unspecified problems with the technical standards. Eventually, the committee passed a "sense of the committee" motion that all necessary steps be taken to advance the cause of data enabled forms. (I think I will screen print and sell some catchy t-shirts advocating for the "cause of data enabled forms... order now to beat the Christmas rush).
In December 2006, and in relation to BAPCPA, White told a Senate sub-committee that the use of smart forms was necessary to process "a large number of cases with the same efficiency in the future as we have over these past 12 months." This ability is threatened by "the fact that the courts have not yet mandated" the use of the smart forms. That individual courts have not mandated the use of smart forms is a legitimate concern, given that they apparently have the authority to do so under federal bankruptcy rule 5005.
In July 17, 2007, White broached the issue again in relation to a House sub-committee hearing on working families, medical debt and bankruptcy. White pointed out, correctly, that the use of smart forms would allow "researchers and others" to identify cases involving high medical debts, domestic support issues and would allow debtors to know sooner rather than later whether the UST would sling down the cursed "presumed abuse" lightning bolt. Bigger picture, according to White, the smart forms will provide more information as to the effectiveness of the system as a whole.
More recently, on October 2, 2007, White told a House sub-committee in an oversight hearing that the UST has developed or enhanced automated systems but stressed the continued need for the mandatory use of smart forms. To his credit (although this is the first public mention I can find of this issue), White did indicate that the mandatory use of such forms ought to be subject to "appropriate privacy and access concerns." Although I didn't pony up the the $15 for access to the ALM online article, it is the privacy issue that is of great concern to those watching this process. It is precisely these undefined privacy and access issues that need to be sorted out for the protection of individual debtors, their families and the attorneys they employ.
Many readers may recall the debacle that ensued after attorneys for a Roman Catholic church diocese filed "redacted" electronic filings that a clever reporter was able to work around and discover information that was supposed to have been kept under lock and key by debtor's counsel. The smart form may be the second generation of this type of problem for all bankruptcy lawyers. By and large, we already don't understand the electronic processes that guide us and surround us (just like the Force). Filing .pdf documents through PACER is currently something of an innocuous process now, but all bets are off once we start uploading data that can be mined, sifted, soiled, bundled, packaged, and re-sold. With the exception of the smattering of lawyers that truly understand metadata, no one that I know of has really voiced any opinion on the potential ethical issues and related dilemmas that will surely follow the implementation of smart forms. While there is no question that White and the good folks at the UST have it right that the smart forms ought to implemented, the "when" of the implementation is the real question; and "now" is probably not the correct answer.
Posted by R. Lee Barrett at 1:20 PM
Tuesday, November 20, 2007
A recent article in Conde' Nast Portfolio.com, written by Claire Hoffman details the financial struggles of the heavy-hitters in the adult industry, such as Vivid Entertainment, as a result of the growing phenomenon of free Internet pornography. According to the article, the adult industry, which hit its peak with the advent of the VCR and later the DVD, is now facing spiraling losses from sites such as YouPorn (the illicit cousin of YouTube), who are giving away what companies like Vivid are accustomed to selling.
One particular focus of the article, and lord knows you have all been reading this far just for the article, is the see-saw dilemma faced by content providers like Vivid faced by the "on-line freebies" of YouPorn type competition. On the one hand, free content sites can present a demonstrable threat to the bottom line of a more traditional content provider. To shore up these losses, or along the lines of an "if you can't beat them, join them" strategy, free content, user-generated content, and social networking sites have been gobbled up by the highest bidder. The real trick is figuring out how to monetize a site that users quickly become accustomed to as free. The Portfolio article indicates that YouPorn traffic was likely to pull in 15 million unique hits in the month of May, 2007 (surely E-Everything is just as provocative...?), resulting in a potential market that is just too damned big to ignore. Even as the current business model evaporates just as quickly as it developed, simply purchasing, or weathering the onslaught of the "free peeks" by YouPorn won't save the traditional content provider because there already exist other free sites that likely are growing almost as quickly as YouPorn; and in the E-Everything age, there is an entire generation of programmers sitting in their Mom's basement right now working on the next generation or application of technology likely to unsettle existing industry players.
While far less intriguing than the adult industry, technology is roiling media and content providers nearly across the board. One need only watch a Letterman re-run tonight, given the Hollywood Writer's strike (Power Brothers!) to see the effects.
Long time readers (thanks Mom) will recall that all I wanted for Christmas last year was the new Sony Reader, which is essentially an electronic platform for books old and new. Now that Harry Potter is married with children, speculation is running high that the publishing industry is coming out of remission and may be back on death's doorstep. If I can just get my novels finished and named as selections for Oprah's Book Club before she finally packs it in, life will be grand. In the mean time, the Sony Reader chugs along in a bit of obscurity. E-books are cheap and quickly downloaded, and more and more books are becoming available for free through Project Gutenberg. Given the prohibitive price of the Reader, and the relative ready access to e-books on the cheap, the publishing industry may indeed have something to fear. Why would I spend $6 for a cheap paperback classic at Barnes and Noble when I could have the same thing for free on my Blackberry?
The most dramatic battles may just be opening in the music industry. After years of falling CD sales (oddly, occurring in the same years that the music industry has produced a great deal of aural crap), the artists are starting to figure out for themselves how to cut out the middleman and go straight to their market, even employing market forces to set the value of the end product. The recent free release of Radiohead's latest album may produce the death knell for the music industry. For my own part, this is the same industry that, nearly from its inception, ripped of and exploited an entire generation of Blues musicians, so they won't find much sympathy in these quarters.
Cold weather is coming to North Texas. I believe I will hunker down with a tub of popcorn, download some free content, and ponder the solvency of the entertainment media...
Posted by R. Lee Barrett at 5:32 PM
Wednesday, November 14, 2007
Recent conjecture that E-Trade may be forced to file bankruptcy as a result of the continuing sub-prime mortgage fiasco shows that even "e-commerce" is vulnerable to exposure. Outside of foreclosures and shocking re-adjustment of ARM's, this may be the first evidence of direct impact on individuals.
Posted by R. Lee Barrett at 2:00 PM
Tuesday, November 6, 2007
Hawaiian Airlines Bankruptcy: Issuing a "Litigation Hold" May not be Enough when Rogue Employee Destroys ESI
Mesa Air Group, a party in bankruptcy litigation with debtor Hawaiian Airlines (HA), got an ugly pre-Halloween surprise from the bankruptcy court hearing the case. According to the the recent opinion in Adv. Proc No 06-90026, and currently being reported as 2007 Bankr. LEXIS 3679, a single, highly placed employee within Mesa Air set about to wipe ESI from several hard drives. In one instance, the destruction took place immediately after a hearing wherein the judge questioned the credibility of the employee. While the debtor predictably obtained the adverse inference finding, this opinion ought to be reviewed as a precautionary tale for counsel who believe they have done their part by issuing a litigation hold. (Also hidden in this opinion is a lesson for those who believe Confidentiality Agreements to the exist as the "end all and be all", but that is a subject for another day).
The court's opinion offers up the following timeline:
HA filed it s Chapter 11 in 2003. In the process of searching for post-petition investors, HA provided passwords to prospective investors allowing them to access the now ever-present "data vault". The ESI in the data vault was capable of being downloaded by those accessing the information. The Debtor required confidentiality agreements, as much of the data was viewed as being "competitively sensitive", required the destruction of the information at a time certain, and prohibited any use of the information except to evaluate the investment. Mesa later became a direct competitor of HA, leading HA to claim that Mesa had breached the confidentiality agreement, allegedly using some of HA's information as its own.
According to the opinion, Mesa's CFO signed a CA, accessed the data vault, and downloaded several electronic documents. The CFO had 2 laptops issued by Mesa, and a computer at home. According to the court, the CFO also happened to have software called System Mechanic Professional, which includes a feature called DriveScrubber2. (In the near future, law professors will quip that any opinion that includes references to things such as DriveScrubber, DataAssassin, FrankenFile or Mac-Daddy Drive DooDoo means someone is getting sanctioned).
Shortly after HA filed its complaint against Mesa, counsel sent a litigation hold via email to the CEO, CFO and COO. According to the court, in late February 2006 the CFO began searching (unbelievably, via email communication) for software to delete files and make it look like they were never on the target drive. A week later, CFO certified to the court that he had downloaded the information from the data vault to a CD, but never to his hard drive. CFO also certified that he never shared the information shared on the CD.
Fast forward to June 28, 2006, when HA seeks a preliminary injunction after finding a draft offering memorandum for Mesa investors that appeared to copy portions of an HA information memo, verbatim. Apparently, the CFO also forwarded portions of HA's memo to Mesa colleagues, stating that Mesa's offering memo needed to "be more like the attached."
According to the opinion, on July 16, 2006, the CFO wipes the hard drive and changes the clock on one of the laptops to conceal any misdeeds. A second declaration was filed by the CFO on August 7, indicating that some previous testimony was incorrect, but no wrong-doing occurred.
On August 8 during a hearing, the court apparently voiced some "concerns" about CFO's credibility, to the extent that the opinion indicated that the CFO commenced to wipe the drive on the second laptop beginning that very day, and continuing until Mid-September. Once again, Daylight Savings came to a premature end in Hawaii, as the CFO changed the clock in this laptop as well.
Between January and April 2006, the CFO apparently also deleted files from the "H drive" of the company servers. Mesa was able to salvage the "H drive" information through tape back ups.
Borrowing from the "What the Definition of Is, Is" playbook, the opinion indicates that someone argued on behalf of Mesa that the only scrubbing taking place was done to remove "adult content" from the laptops as well as the H drive. It seems there was some testimony regarding "adult content" in 2003 or 2004, but the court found no credible evidence that expunging some nebulous adult content was the purpose of the scrub down in 2006, unless of course someone had some fetish that they disguised as "Hawaiian Airlines"...
Aside from the fact that someone in the food chain decided, as between dirty pictures and dirty deeds, that dirty pictures are the lesser of two evils, the opinion is fairly uneventful. The opinion does serve as a quiet reminder that simply issuing a litigation hold, then sitting back and waiting for IT to save the company is simply not enough. On pages *14 and *15, the court suggests that Mesa could have taken "reasonable steps that would have prevented, or mitigated the consequences of... destruction of evidence." One such step would have been creation of backups of the laptop drives and the H drive after the adversary was filed. (Apparently the tape back ups were only good for January 2 and April 6, 2006...). The court declared that simply instructing employees to preserve evidence and trusting them to comply was not adequate, and that instead, "Mesa could and should have taken reasonable steps to prevent all of its employees from doing wrongful and foolish things, like destroying evidence...". While the court is careful to point out that CFO acted alone, Judge Robert Faris also made it clear that Mesa "facilitated" the CFO's misconduct.
What duties might counsel have beyond issuing a litigation hold, working on the assumption that a corporate client will be looking to counsel for advice as to how to avoid a "dirty deeds" opinion? Unfortunately, the opinion does not address whether or not Mesa had a document retention/destruction policy, whether or not such a policy was followed, or what items might be incorporated into such a policy to mitigate the actions of a rogue employee. Even in the absence of a policy, the opinion does not address what steps, if any, Mesa may have taken prior to June 2006 to prevent or mitigate the consequences of such misdeeds. The opinion does not delve into (nor do I recall ever seeing an opinion that did) the administrative permissions at the server level that allow an individual user to delete documents.
Given the constant state of flux that inevitably follows the development and implementation of technology-based business applications, it is likely that opinions like this will become increasingly fact intensive. Rather than rely on an increasingly well-informed bench to discover the correct answer, counsel must shoulder the burden of understanding the client's digital enterprise. This means finding, and learning, the client's document retention policy. This means identifying the potential information holes. Yesterday's smoking gun email is today's "personal" Internet-based email account. The media roundly criticizes, and rightly so, when the government loses laptops chock-full of military secrets; for the lawyer, not knowing how many laptops a key employee may have, or as in the K-Mart case, which former employees still have data, is just as damning.
Increasingly, corporations will be forced to face choices such as allowing email to stored at the user level, or the ability of an individual user to delete documents off of the companies shared servers. Not only will counsel need to have some minimal technological skill to contribute to that process, they will have to translate that process to the bench in order to avoid similar Halloween surprises.
Posted by R. Lee Barrett at 4:11 PM
Friday, October 19, 2007
My friend John Sirman and his cohorts at the State Bar of Texas continue to amaze me. Earlier this year, the Texas Bar was the first bar organization in the country to offer its own on-line social network, known as Affinity Circles. This has already been a great tool for me to increase readership of this blog, to locate local counsel in other areas, re-connect with old friends, and develop new relationships.
Now the Texas Bar is taken a step farther into the territory that no bar association as tread before with the announcement of its YouTube contest, "Lone Star Stories: Texans on Justice". According to an email announcement from Sirman, the "contest is intended to give all Texans a venue to share their vision of the promise of Justice for All."
Two winners will be selected, (1)18 and younger and (2) Over 18. The youngster gets a $2500 scholarship, and the oldster gets $2500 cash. Both winners get an expense paid trip to the January State Bar board meeting in Grapevine, Texas. Deadline for submission is Dec. 15.
Rules, entry forms, and parental permission slips can be found here, and additional information can be found here.
I think this is a phenomenal idea, and applaud Sirman, State Bar President Gib Walton, and everyone else who had a hand in putting this together. Since I am still bitter about not being selected as a finalist in the Bar's short story competition last year, don't look for me to enter a video, but I have lots of creative children that need some scholarship money...
Posted by R. Lee Barrett at 11:31 AM
Monday, October 15, 2007
Our Biglaw friends at Fulbright & Jaworski have released their 4th annual Litigation Trends Survey (available here) which on its own is something of an interesting read. The more interesting tidbits relate, of course, to the respondents' views on E-Discovery.
According to the report, an incredible 70% of the respondents indicated that "...e-discovery as the subjects of motions, hearings or rulings in the past year remain a rare or nonexistent event...". This apparently was no change from 2006 when the issue was first raised in the survey. Two recent cases, one federal and one in Texas state court, may reveal in part why this is the case. In the former, litigation related to a bankruptcy case, opposing counsel kind of, sort of, sought to obtain ESI as part of its document request. Those who shall remain nameless fumbled around with the electronic part of the definition of a document like a freshman frat boy fumbling with a girdle. Pseudo co-counsel, a far better lawyer than myself, waited until two days before the production deadline to find out what she may, or may not, have to produce, and in what form.
The latter case involved some post-judgment discovery shenanigans in state court. One of the increasingly popular theories in Texas, for a number of reasons, is that of alter ego (it's not just for breakfast anymore). It stands to reason that the discovery related to alter ego would necessarily give opposing counsel pause to at least consider seeking electronically stored information. Especially given that the Texas Rules of Civil Procedure have made provisions for the discovery of "electronic or magnetic data" since at least 1999.
E-Discovery vendors must be rejoicing, and planning on a Merry Christmas indeed, as the survey also reflects that third party vendors are being utilized by 51% of respondents, as opposed to 37% of respondents in 2006. Law firms seem to be content playing second fiddle to the vendors, as only 30% of the firms surveyed reported having special technical expertise, an increase over the 26% so reporting last year. One additional tidbit, is that significantly more companies have retained, or considered retaining, either national or regional counsel to handle specific e-discovery issues.
As for the use of third party vendors, the obvious concerns include the cost of such services and the protection of attorney-client privilege. But there are less obvious concerns, that potential customers and their attorneys, ought to be aware of. At the outset, the only meaningful way to take part in the process is for the end-user to understand what it is they are getting for their buck, and having realistic expectations about the outcome. I recently read an article, perhaps one of Craig Ball's, indicating that current approaches to term search may be only 80% effective. Given that the survey keys in on suits involving $20 million or more, 80% is more akin to the adage about horseshoes and hand grenades.
Even more important than the client understanding what the vendor is doing, is the vendor understanding what the vendor is doing. There is concern that a sub-group of e-discovery experts in the industry are really only experts at picking out software packages with all the pretty lights. There are a growing number of published opinions that make passing reference to "established protocols" among "computer experts". Just because I can light and smoke a cigar does not make me an expert in cigars. If I tried to roll a cigar by hand, all I would have at the end of the day would be a handful of mashed up leaves and a serious nicotine overdose. I have written an article (soon to be published in an ABA newsletter) regarding the application of Daubert to e-discovery experts. There appears to be a growing trend of courts expecting the "computer experts" to know what it is they are rolling, and how it is getting rolled.
The survey results also give an interesting look into the level of risk corporations are willing to take on in order to allow their worker bees to use technology. For instance, 72% responded that they allow employees to access company networks from home. 54% have the luxury that even I don't, the use of instant messaging. Interestingly, only 24% allow employees to attach documents to IM's. 48% allow the use of "outside email accounts" from company computers. 40% retain their voice mails, and an equal number utilize technology allowing voicemail to be emailed to others. For all the blather being published in blawgs and newsletters alike, for all the headlines and the lawsuits by the states' Attornies General, only 40% of the companies responding have a Chief Privacy Officer.
Although it would have been nice to see more data on retention periods, the survey also reflects that the median retention period is 60 days. The industry pack-rats, those tending to keep data more than a year, are real estate and technology/communications.
Respondents also reported some interesting numbers related to the costs of privilege review. 30% indicated that their privilege review costs only consumed 6-10 percent of litigation costs. 16% of the respondents reported, however, that privilege review ate up 30-50 percent of litigation expense. That line-up includes, in descending order, technology/communications, energy, health care, and financial services.
At the end of the day, 27% of the US respondents indicated that the 2006 FRCP Amendments actually made it more difficult to them to address ESI obligations in federal litigation. 60% indicate the amendments had little effect.
Bankruptcy counsel would be well-advised to take a look at the Fulbright & Jaworski survey findings. Even though the subject matter is litigation, the survey also approaches the issues as a function of the business of its clients. Sounds a little like what Chapter 11 lawyers are increasingly called upon to do...
Posted by R. Lee Barrett at 5:25 PM
Wednesday, October 3, 2007
The recent bankruptcy of SCO Group seemed to bring a mirthful grin to the ultra-techy legal geeksters among us. Given the forces that drove SCO Group into Chapter 11, and the future problems that the company may face in terms of ever generating a dime of revenue or goodwill on its future UNIX products after the LINUX fiasco with Novell (and a host of others), makes the reliance on existing talent a bit of a surprise. I hope all those clever estate planners who patent their legal advice take note of SCO's dilemma...
Posted by R. Lee Barrett at 5:13 PM
Monday, September 24, 2007
The piece below summarizes the dearly held beliefs of many bankruptcy practitioners throughout the country: that commercial bankruptcy is about to experience a huge up-tick in its cyclical progression. The continued onslaught of the sub-prime mortgage industry, coupled with $80 oil seems to have everyone on edge. That commercial credit, until recently, had been nearly as loose as the sub-prime mortgage industry, has been a poorly kept secret.
Last week, the Bombay Co. filed for Chapter 11 protection in Ft Worth, Texas. The Bombay bankruptcy may very well be the tell-tale leak in the failing dike from which will spring forth this expected wave of business bankruptcies nationwide. As the next generation of commercial bankruptcy presumably gets underway, the crack staff here at E-Everything will endeavor to watch more dockets and see how, or if, bankruptcy lawyers and judges handle electronically stored information (ESI) in the bankruptcy context. (Understand that comments on the Bombay case will likely taper off based on the involvement and client representation of those lovely folks at Forshey & Prostok that provide me a day job!)
According to my good friends at SiteMeter, this blog has been viewed by at least 2 surfers from the Department of Justice, my good friend Steve Jakubowski, my new friends at Texas Law Blog (who rumor has it will be starting their own podcasts soon), and by my Mom who checks in just to make sure I am not using any untoward language. At the very least, practitioners ought to be acknowledging their client's digital enterprise in Schedules, SOFA's, cash collateral orders, or even in related first day pleadings. However, if lawyers cannot recognize the thinly veiled reference to binary in the title of this post, we still have so far to go...
In the mean time, here is where the rest of the "insolvency press" is focused:
Posted by R. Lee Barrett at 1:21 PM
Monday, September 10, 2007
The good folks at the recently established Small Scale Digital Device Forensics Journal might have some interest in this development over the summer. Further proof that counsel can never get too far behind the latest technological and forensic developments. Check back here later in the fall for a good article regarding "experts" and ESI.
Posted by R. Lee Barrett at 12:35 PM
Thursday, September 6, 2007
A joint bar-court committee, headed up by the obviously talented Magistrate Judge Paul W. Grimm, in the District of Maryland has produced a Suggested Protocol for Discovery of Electronically Stored Information (ESI), which some have referred to in short hand as the Maryland Protocol. The Maryland protocol is available as a .pdf download here.
While the Maryland Protocol apparently has not been formally adopted by Maryland courts, it presents a very complete and technologically sound blueprint for attorneys and courts alike in suggesting parameters for dealing with the 2006 FRCP amendments. Indeed, the introductory section makes clear that the suggested protocol is not a binding document, nor is it necessarily final or complete. From the outset, the tone of the protocol suggests that it is best suited for "run of the mill" ESI cases, and does so without some of the wide-eyed, breathless predictions that even occasionally creep into this blog.
The scope of the protocol is specifically restricted to the "ESI provisions" of the FRCP. The first phrase or term defined by the protocol is metadata ("Meta-Data" in the protocol), and stretches far beyond the trite description of "data about data." Instead, the protocol describes metadata as "(i) information embedded in a Native File that is not ordinarily viewable or printable from the application that generated, edited, or modified such Native File; and (ii) information generated automatically by the operation of a computer or other information technology system when a Native File is created , modified, transmitted, deleted or otherwise manipulated by a user of such system. Meta-Data is a subset of ESI." In a special section designated solely for metadata, the protocol also distinguishes between System Meta Data, Substantive Meta Data and Embedded Meta Data.
The protocol goes on to designate Static Images as the cornerstone for the form and format of ESI discovery. In essence, the protocol establishes up front that the form of production of ESI (unless the parties agree otherwise or unless the court so orders) that ESI should be produced as Static Images in the format of either a Tagged Image File Format (.tif files) or Portable Document Format (.pdf files).
Properly, the first substantive area addressed by the protocol is the Conference of Parties (see Rules 16 and 26). The protocol suggests, against the common current, that the parties might even indicate to the court that no ESI discovery is desired. One interesting suggestion, though reasonably framed, is that on-site ESI inspections be conducted by agreement of the parties, or "in circumstances where good cause and specific need have been demonstrated...". The protocol also allows for the possibility, as many cases have, that on-site inspections be conducted by independent, third party experts.
Another of the protocol home runs is the gentle reminder that "prior planning and preparation is essential for a Conference of Parties...". If this concept isn't quite clear, scroll down and read the three Blue Light Special posts. This planning includes the exchange of information prior to the meet and confer. One of the pleasing suggestions relates to the participation of an "ESI coordinator". An ESI Coordinator, by the way, is one parties' tech guru (not the technical definition within the protocol by the way). The protocol indicates that where one party requests that the other parties' ESI coordinator attend the meet and confer, and the other party agrees, the requesting party needs to commit its justifications for requesting the coordinator to writing. If the court ultimately decides that the meet and confer was unproductive, and was unproductive in part because of the absence of the requested ESI coordinator, that fact may be considered in future sanctions proceedings.
The protocol also addresses such matters as redaction, bates numbering and other more pragmatic concerns that often get overlooked.
The real victory of the Maryland Protocol is the gentle, yet thorough, guiding hand of the "technical consultants" who were involved in developing the protocol. The protocol offers a basic "To Do" list of areas of inquiry and preparation for counsel in approaching ESI discovery. The technical aspects are addressed in a broad, plain language fashion. At the same time, very specific areas of concern are described in enough detail, or addressed within a context such that most attorneys will find significant value an understanding in the protocol.
The three part KMart posts on this blog are replete with examples of counsel not having the benefit of a protocol such as that suggested by the Maryland court. After reading the Maryland Protocol, wise counsel may never again approach ESI discovery in the same light again. Simply put, the Maryland Protocol should be a standard feature of any trial notebook.
Now if we could just find someone smart enough to generate an accompanying Bankruptcy ESI Protocol...!
Posted by R. Lee Barrett at 9:57 PM
Tuesday, September 4, 2007
Finally, after detailing Timeline #1 and Timeline #2, comes some of the points to be considered and lessons to be learned from a recent KMart discovery opinion. To be certain, these issues were developing prior to the 2006 amendments to the Federal Rules of Civil Procedure and hindsight is largely 20/20. (Anyone poking around in the archives of this blog knows that there are those, including yours truly, who believe that e-obligations for bankruptcy practitioners arose long before the amendments kicked in). KMart is however, a blueprint for the future, so the points raised here are not intended as criticism of counsel on either side, or of the good judge. Rather, KMart offers some hard learned lessons from members of the pioneering group blazing new trails for the rest of us. Having said that, let the pole-axing and filleting begin...
1)Preserving Responsive Evidence - This item overlaps with a number of others, but in the context of KMart v. Global Property Services, the issue arose after KMart made its first paltry production. After receiving only 66 pages of responsive documents, Global's attorneys apparently corresponded with KMart's lawyers in order to make certain that KMart was preserving responsive evidence, undoubtedly including any electronically stored information (ESI). Given the current apparent trend of bankruptcy judges being somewhat conservative in establishing dates that a duty to preserve arises, potentially adverse parties ought to be quick to pull the trigger in sending out preservation letters, in order to make sure that preservation duties arise as early as possible.
2)Stipulations and Timelines - A July 11 order reflected the parties' stipulation that responsive corporate emails would be produced on July 8, with responsive emails from the individual stores to be produced by July 31. While clearly the attorneys had to have "met and conferred" to the extent necessary to enter into the stipulation, the facts of the case make it clear that the stipulation was ill-conceived, at least as to KMart. There was too much ESI, stored in too many places, controlled by too many people, to have made such a stipulation either reasonable or possible. Even under the new "meet and confer" requirements of the FRCP, the likelihood that such a deadline could have been met is slim. Internally, KMart probably didn't have the horses to fulfill such an onerous burden; and outside counsel may not have had a heavy enough whip hand to keep the GC on course. In any event the stipulation was likely, at the very least, counsel agreeing to something that they really didn't understand. An e-discovery stipulation is not one of those on-line licensing agreements that we all click on without reading, the technical side has to be as well understood by counsel as the legal impact.
3) Determining Corporate protocols for ESI - 6 months after the "friendly reminder" to preserve relevant documents, KMart produced another 83 pages of documents concerning email access and related document protocols. There truly are two sides to this particular coin. By this time, deposition #1 of KMart's IT goon squad should have already taken place. After KMart produced 150 pages (paper documents apparently), and well beyond the stipulated time frame, something clearly stinks in Des Moines. As for KMart, this is the poster child for why counsel must know from day one the breadth, scope and basic workings of their client's digital enterprise. At the outset, such knowledge focuses the minds of GC. Long term, this learning exercise educates outside counsel as to what questions ought to be asked. Otherwise, we don't know that which we do not know.
4) Trigger dates - The KMart opinion has some fact specific quirks which support the trial court's determination of the debtor's trigger date as to when the duty to preserve documents should arise. Depending in part on the existence or absence of a document retention policy, strong arguments exist both in the bankruptcy code and as a matter of public policy, to push the accrual of the preservation duty farther into the past than current bankruptcy opinions seem to do. At best, bankruptcy is sometimes ill-fitted to the FRCP (and the attendant bankruptcy rules). The same documents that are relevant in bankruptcy litigation also comprise books and records, and perhaps property, of the estate. While not necessarily true in this particular instance, it seems likely that the best interest of the creditors will often be best served when the debtor is required to preserve such documents, much like Chicago voters, early and often.
5) Document retention and destruction policies - For any number of reasons, document retention policies may be just as valuable to a Debtor in Possession as the automatic stay. Without re-hashing all of those reasons, the bottom line is that pre-petition, bankruptcy counsel needs to know if the client has a document retention and destruction policy, and if so, what it is and how it works. It might even be a good idea to have the judge say grace over an existing policy post-petition. If no policy exists pre-petition, an early order of business may be to encourage the client to develop a satisfactory retention and destruction policy, and have the court bless that pleading. The answer in some cases has been to include document retention language in cash collateral orders. A satisfactory retention and destruction policy wont fit, and probably doesn't belong, in a cash collateral order.
Specific to the KMart case, and from the IT perspective, KMart employees simply had too much discretion as to the storage locations of their emails. The employees' ability to defeat the automatic purge feature through manipulation of the "date sent" metadata also exposed a hole in the KMart retention policy.
6) Evading the retention policy - In the KMart case, there were at least two storage areas exempt from automatic purging. One was a "public" drive, and the other was the C: drive of each individual desktop or laptop computer. At the very least, this means that employees were largely free to store ESI indefinitely, free of the periodic house-cleaning attempts of KMart's IT department.
7) The Discovery Scourge of Email Grows - Those on the KMart payroll testified that email cannot be stored on the public drive referred to as P:. That ain't true on at least one level. Recently faced with the revelation that 6 years worth of accumulated emails, which were being backed up each night on the Exchange server, was entirely TOO much, I converted all my email folders from closed cases to .pdfs, deleted the emails from their native format, and saved the converted emails to a folder on a different public drive. (Yes, even though the file still resides in the exchange server, I am no longer getting yelped at because my email folder is too large). The point here is, that while email might not be stored in its native format on a separate drive or other location, that certainly would not prevent a target from saving their emails in some other format, and storing them where IT believes they otherwise do not exist.
Microsoft Exchange also creates some additional layers that most attorneys may not be accustomed to considering. For instance, in order to help me wade through the continuous deluge of email, we recently set up my assistant so that she has full access to my firm email. Whereas a common theme in the KMart case was to have individual employees look on their own computers for their own emails, counsel needs to recognize that multiple individuals may have access and control over one person's email account.
8) Model Rules for Model Counsel - Despite the "discount retail" approach that KMart may have made internally regarding Global's discovery requests, outside counsel has many puppeteers to answer to. While the old saw that "The Buck Stops Here" may not apply to counsel's invoices, it still applies to the hardy boys and girls that sign their names to pleadings. While learning about a client's digital enterprise might rank right up there with signing up for a drug-free root canal, it is an increasingly necessary evil that counsel cannot avoid.
9) Hired Guns and Contract Killers - KMart GC first looked to a contract attorney to handle the Global discovery responses. While there may be absolutely nothing wrong with contract attorneys (some of my best friends and neighbors are contract attorneys), it might not be a good idea to turn over an ESI intensive project to a hired gun. They might not know the company structure, culture, or politics so that they cannot get the requisite cooperation from tenured employees. As such, a contract attorney may not have the buy in and commitment necessary to seek and find all the responsive ESI. Worse, they may move on in 6 months, or even in 6 weeks, and a good bit of institutional knowledge is lost.
For all these reasons, and more, the KMart/Global Property opinion serves as a valuable educational tool for those who believe ESI is someone else's problem that is subject to an easy fix. Instead, the KMart opinion should be viewed more like a Clancy novel, in that minor, seemingly unconnected events and oversights can rapidly coalesce into an uncontrolled outbreak of armed litigation.
Posted by R. Lee Barrett at 9:32 PM
Wednesday, August 29, 2007
Wednesday, August 22, 2007
Tuesday, August 21, 2007
Long time readers know that this blog was intended to be more than just an insomnia curing repository for discussions of sec. 541 of the Bankruptcy Code in the digital era. Those same long time readers (thanks Mom!) also should have figured out by now that music is a big part of the forces motivating yours truly. To that end, E-Everything was placed to see the announcement of the formation of eWorld Properties and eWorld Entertainment, with Russ Regan being the first named to the Board of Advisors for the enterprise. Thanks to the forward thinking and creativity of Russ Regan, and other like-minded individuals, it is now possible for me to obtain a CD quality copy of a Black Crowes concert just minutes after the final encore. One offshoot of this new venture is the Boomerang Media Station, detailed in the story below.
Now if I can just avoid getting sued for using the phrase E-Everything...
Posted by R. Lee Barrett at 2:41 PM
Sunday, August 19, 2007
It was the contract attorney whose efforts, it appears, led to the initial production of just 66 pages of documents in response to the discovery requests. From the court's opinion, it seems that no one really knows who the contract attorney talked to, or what the contract attorney did, in terms of locating responsive ESI.
The H Drive issues notwithstanding, KMart also discovered that it had other problems related to the care and feeding of its ESI in relation to previous employees. Former Employee proved to be a source of ESI for Global, as Former Employee had at home an old computer that had been replaced by KMart, and that Former Employee had kept after his termination. When he had still been gainfully employed, Former Employee had the ability to work remotely, and also had the ability to download emails onto his laptop. The court pointed out that, had the emails not resided on Former Employee's laptop, they likely would have been automatically deleted sometime in May or April 2003. Despite the auto-delete policy, Former Employee's emails were part of the 456 pages produced in March 2006.
Testimony from existing employees was not much better. Regional Manager testified in February 2006 that his search for ESI was, "Just a search of any documents that I stored on my computer." However, the computer that Regional Manager had apparently been using during some of the relevant time periods was a laptop that had been stolen at Detroit Metro Airport.
Although the opinion doesn't seem to cover what or why, there is some humor in noting that, at some point, KMart had the cajones to file a motion for production, seeking ESI in its native format. The Court granted KMart's motion January of 2007.
In Part 3, one geeky lawyer's opinion on at least 9 fundamental points illustrated by the KMart opinion...
Posted by R. Lee Barrett at 9:20 AM
The company in the news piece below, PubliCARD, Inc., develops the "smart cards" that are all too familiar to today's college students. The applications can include cashless cafeteria transactions, tracking attendance, etc. Those attorneys for the Debtors in this case must be pretty folks, being able to wrap their "reorganizing arms" around the technology involved in this case...
Posted by R. Lee Barrett at 8:41 AM
Sunday, August 12, 2007
Posted by R. Lee Barrett at 12:14 PM
Wednesday, August 8, 2007
Posted by R. Lee Barrett at 8:21 AM
Tuesday, July 17, 2007
According to an article out last night, a handful of bankruptcy courts are about to embark on a pilot project aimed at making mp3 audio files available of hearings, that can be downloaded in much the same way we currently use PACER to access dockets.
The project is reportedly the brain-child of Judge Rich Leonard of the Eastern District of North Carolina. Working in conjunction with Case Management/Electronic Case Files brutes, and those lovely people in the courts' Administrative Office, the program will feature a newly designed interface so that Internet users can listen to audio files of hearings.
Not only is it convenient for small budget constituents and the public at large, it also means that in future big cases, I don't have to listen to NYC lawyers complain about Ft Worth not having any decent restaurants... Even better, mis-informed types like Senator John Cornyn will have one less arrow to use in messing with existing bankruptcy venue provisions.
After the program is put together, apparently it is going to be tested in the following bankruptcy courts: Northern District of Alabama, District of Maine. Also will be featured in the district courts of Nebraska and the Eastern District of Pennsylvania.
During the test, lasting only a year, the cost to download a file will be 16 cents. Later, small concerns such as bandwidth may increase the cost for larger files.
Kudos to Judge Leonard. This is exactly the kind of forward thinking that our profession needs more of. Not only can I now justify buying that iPhone I have had my eye on, but also a new, sporty European sedan
that is .mp3 ready!
Posted by R. Lee Barrett at 6:55 AM
Friday, July 13, 2007
First a programming note - I apologize for having been away for so long. Given the unprecedented rain that the North Texas region has been experiencing this summer, I have spent every waking hour learning all I can about Indoor Drag Racing. By all accounts, I should have plenty of extra resources to invest in this great new idea. If I can just figure out how to develop a practice near Grandville, MI, I could would dedicate all my nights and weekends to furthering the dream that is AYA Motorsports.
The ABA has some interesting resources through its Law Technology Today/Digital Edge page. on the practise side, the lovely and talented Steve Jakubowski just emailed to me a link for the free download of The Sedona Principles, Second Edition, Best Practices Recommendations and Principles for Addressing Electronic Document Production.
Posted by R. Lee Barrett at 11:05 AM