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.
