Electronic Data Records Law | How to Win E-Discovery

Native Format Electronically Stored Information?

Collection, Production Tactics | Ordinarily Maintained or Reasonably Usable Form

In eDiscovery, ESI can be produced in many forms.  For both the requesting party and the producing party, the form chosen can impact strategic issues like cost, search-ability and ease of manipulation.  Form of production can be a contentious issue between litigants.

California’s new electronic discovery rules (Assembly Bill 5 - amendments to the California Rules of Civil Procedure) set a framework for negotiating the form of ESI production.  

Amended Section 2031.030(a)(2) of the Code of Civil Procedure provides:  “A party demanding inspection, copying, testing, or sampling of electronically stored information may specify the form or forms in which each type of electronically stored information is to be produced.”  [Notice the words "testing" and "sampling". 

 They are a nod to the future of eDiscovery, where one-by-one review of records is impractical, so statistical methods are used instead.] 

Further, amended Section 2031.280(d) provides:  “Unless the parties otherwise agree or the court otherwise orders, the following shall apply: (1)  If a demand for production does not specify a form or forms for producing a type of electronically stored information, the responding party shall produce the information in the form or forms in which it is ordinarily maintained or in a form that is reasonably usable.”

Like the FRCP, this framework leaves lots of room for negotiation and disagreement.  

“When collecting a unit of ESI (such as an e-mail) within an organization, we might find it in more than one format,” says Greg Smith, eDiscovery specialist at Messaging Architects.  “It might be in network backup.  It might be an e-mail management system like Groupwise.  It might be in an archival system like M+Archive.  It might be in other formats and locations too.”

Leading courts like Williams v. Sprint/United have spoken of production of ESI in its “native format.” For courts like Williams, the rough idea is that a unit of ESI should come with its original meta data and structure, so as to enable better insight into what the ESI was and what it meant.  

According to Greg Smith, “The concept of native format might mean different things for different circumstances in an enterprise information system.  For example, the structure and metadata applicable to a given e-mail might be different depending on whether the email is collected from an electronic mail system like Microsoft’s Exchange or from an archive appliance like Symantec’s Enterprise Vault.  It’s my job to help trial counsel understand the different possibilities, evaluate options and then document/explain the format decisions and actions that are executed in ESI collection and production.”

–Benjamin Wright

Mr. Wright is an affiliate of messagingarchitects.com, experts in eDiscovery services.   Here is an ARMA podcast describing Messaging Architects' work in e-mail archiving, including its workshop for development of an email records policy in an enterprise.

US Interior Dept. Destroys Email

Printing of Electronic Mail as Federal Government Record Retention?

The Bureau of Indian Affairs (US Department of the Interior) suffered embarrassment in court for the deletion of financial e-mails by former Assistant Secretary – Indian Affairs, Neal McCaleb.  The e-mails contained important information about money the bureau was collecting and holding in trust for Indian tribes. McCaleb deleted the e-mails because his IT department allocated him too little hard disk space. Under department policy, he was expected to print important e-mails onto paper before he deleted them, but because of confusion about who was authorized and directed to do the printing, no one actually performed the tedious and unwanted task.

Officials like Mr. McCaleb don't naturally embrace clerical duties like printing of e-mails.

The case demonstrates  

1. how legally important e-mail records can be,

2. the folly of an IT department trying to save a couple of bucks by being stingy with hard disk space, and

3. how dangerous it is today to view printing as a way to preserve email (or text messages) need for purposes of internal control or funds management.

See Jean Pagano, “Special Master reports findings on deleted e-mails: Department of Interior described as ‘chaotic’,” Native American Press/Ojibwe News, January 31, 2003. This matter was part of the protracted “Cobell” litigation brought by Native Americans against the Department of the Interior. Cobell v. Norton, et al. Case No. 1:96CV01285 (D.D.C.).

–Benjamin Wright

Financial E-Recordkeeping Law

National Instrument 31-101: E-mail, Collaboration, Online Chat, Instant Message, and Social Networking Records?

Canada is in the process of adopting new rules on the retention of electronic records by securities firms such as stock brokerages. The rules will impose rigorous requirements for preservation and availability of records for e-mail, text and other communications between firms and their clients.

The rules are part of proposed National Instrument (NI) 31-103, which will install a new nationwide regime for regulation of securities firms. Although authorities hoped to have made NI 31-103 effective as of March 31, 2009, they are still refining it. They anticipate publishing the next draft around April 1, 2009, with implementation beginning sometime after that.

Even though the rules are not yet final, firms can see that the new retention requirements are coming. They are wise to begin e-record retention now.  NI 31-103's new requirements are consonant with the larger trend in society to expect that enterprises keep plentiful electronic records.

Proposed NI 31-103 Section 5.15(1)(a) provides: “A registered firm must maintain records to accurately record its business activities, financial affairs, and client transactions.”

Proposed Section 5.5: “In most circumstances, registered firms should maintain the following records to satisfy subsection 5.15(1)(a) . . . all e-mail, regular mail, fax and other written communications with clients.”

What are the standards for record retention? Seven years is an important time period. Proposed Section 5.16:

"(1) A registered [securities] firm must keep its records safe and in a durable form.
(2) For a period of two years after the creation of a record, a registered firm must keep the record in a manner that permits it to be provided promptly to the regulator, and thereafter the record may be kept in a manner that permits it to be provided to the regulator in a reasonable period of time.
(3) A record provided under subsection (2) must be in a form that is capable of being read by the regulator.
(4) A registered firm must keep
  (a) an activity record for seven years from the date of the act, and
  (b) a relationship record for seven years from the date the person or company ceases to be a client of
the registered firm."

So 5.16 generally provides for shorter retention for “activity records” (seven years from the date of the act) than for “relationship records” (seven years after the client ceases its engagement of the firm).

5.16 goes on to define "relationship records" (which relate for example to the ongoing relationship between a firm and its customer) and “activity records” (which relate for example to specific purchase and sale transactions). In particular instances, however, the difference between an activity record and a relationship record could be indistinct and unclear. An e-mail can contain both activity information and relationship information.  Under a conservative interpretation, this lack of clarity could militate toward keeping even presumably “activity” records longer than seven years.

US securities firms have been dealing with similar record retention rules for a decade, and the US experience is a useful guide for Canadian firms. In 1997 the US Securities and Exchange Commission expressly required securities firms to store certain client communications such as e-mail under SEC Rule 17a-4. As new technologies have emerged, the requirements have been read to include them. For example, NASD Rule 03-33 specifically interpreted 17a-4 to include instant messages.

On several occasions US regulatory authorities have penalized firms for poor electronic records retention practices. For example the New York Stock Exchange fined J.P. Morgan $2.1 million.

As a matter of practice, compliance with rules like Rule 17a-4 and NI 31-103 can be easier if electronic messages are stored in a dedicated message archive server rather than in a production e-mail server or in network backup.

There is no reason in principle why such rules would not be read to include records of new forms of communications as they arise – such as postings on a message “wall” in a social networking environment like Facebook or Ning or txt or video communications via Skype.

–Benjamin Wright