In the line of fire

Date: 14 April 2010
Authors: Deborah Blaxell
Issue: Online only
Categories: Features, Procedure & practice, In-House

In-house counsel are under pressure to protect against e-disclosure slip-ups, says Deborah Blaxell

The imposition of sanctions for the mismanagement of electronically stored information (ESI) has been commonplace in the US for some time. Earles v Barclays Bank plc [2009] All ER (D) 179 (Oct) demonstrates that similar attitudes are beginning to transgress national boundaries.

Earles v Barclays Bank plc revolves around a relatively straightforward factual dispute:

l Whether the defendant bank received certain instructions from the claimant, a customer of the bank, either verbally, by telephone, or by computer.

l The claimant alleged that a number of funds transfers were made by the defendant in breach of mandate, and denied that certain alleged phone calls and e-mails took place.

His Honour Judge Simon Brown QC summarised that: “…The resolution of the primary issue appears beguilingly simple. Were telephone calls or e-mails made on each of the 5 occasions and, if so, what was said or written?”
The judge was content that, when conducting the disclosure exercise, the lawyers had acted in good faith and were not driven by a desire to evade the court or to gain any tactical advantage in the litigation. However, he openly criticised both in-house counsel and external solicitors acting for the defendant for not producing or preserving key information (in this case, phone and e-mail records that would support or be adverse to their contentions) which could have led to the summary disposition of the case, or at least the more efficient conduct of the case at trial. The failure to disclose a key employee’s telephone records, transfer sheets and e-mail account on the basis that the employee had retired from the bank was described as a “lame excuse”. Judge Brown continued: “...an expert in information technology, either in-house or a consultant, could easily have been instructed to retrieve ESI from various back-up sources...but no such expert appears to have been instructed to do so.”

Ultimately, the defendant won its case. However, the judge took the defendant’s conduct of the electronic disclosure, including its conduct prior to the litigation (which he felt “fell far below the standards to be expected of those practising in the civil courts”) into account and imposed a costs sanction on the defendant such that it was entitled to recover only 50% of its costs against the unsuccessful claimant.

Taking precautions

This case illustrates that in-house counsel, who are often responsible for managing the initial search for evidence, must take appropriate precautions when making decisions about the relevance or otherwise of evidence. In making these key decisions, the lawyer must give serious consideration to the extent to which relevant ESI exists, and must explore how such information might be preserved, extracted, processed and reviewed. Inexperience of whether and/or how ESI can be retrieved, and whether the cost of the act of retrieval and the time it is likely to take is proportionate in the circumstances will be no defence to criticism of an organisation’s disclosure methods.

A future gameplan

Know the rules

Be aware of the rules governing disclosure in the civil courts, including the disclosure of ESI, and comply with them. In particular, note that Civil Procedure Rule 31.4 and Practice Direction 31.2A require that parties discuss with their opponents and, where possible, agree a strategy for the search and production of key evidence including ESI at an early stage, before the Case Management Conference. Judge Brown commented that: “The abundance of this ESI in cyberspace means that potential litigants, in particular organisations such as Banks at the current time, need to anticipate having to give disclosure of specifically relevant electronic documentation and the means of doing so efficiently and effectively.”

Know your business

In-house counsel must be aware of where and how key information is stored within the organisation, what information can be retrieved, how, by whom and at what cost to the organisation. To this end, lawyers need to identify from whom, within their organisation, they can obtain expert information technology advice; alternatively they need to identify an external information technology consultant who can
(i) provide advice and assistance in identifying the key ESI at an early stage, and thereafter
(ii) assist in the preservation, collection, processing, review and production of ESI for the disclosure process.

Know your information technology specialist

A recent KPMG Forensic and Harris Interactive survey of 200 global companies (November 2009) highlights the fact that a large number of in-house counsel do not feel equipped to find data and do not have any meaningful contact with their organisation’s IT department. Clearly this must change if responses to urgent requests are to be managed and the reputation of the organisation is to be protected. The marriage between lawyers and information technology professionals can be an uneasy pairing, with each feeling that they have little in common with the other. In-house counsel need to move away from this traditional view if they are to perform their roles effectively. They need to embrace new technology, spend time acquainting themselves with the various information management tools available and assess the relative benefits or otherwise of the tools available in the context of their organisation’s requirements. Importantly, they need to understand the methods applied in processing and reviewing data so that they are able to explain and defend, on behalf of their organisations, their decisions relating to the processes used in reviewing data.

Know how to respond to a request for ESI

In-house teams need to put in place, and communicate appropriately throughout the organisation, a response plan which can be activated in the event of an ESI request. The plan should at the very least:

l nominate an employee who will be the key point of contact and who will (a) provide IT professionals with detailed instructions about the relevant categories of data and the relevant custodians to be searched and (b) project manage the team and keep a defensible record of how the searches for ESI are conducted. The employee will usually be an individual from the legal team;

l set out full details of the internal IT support contact and list full details of the preferred external consultants, providing details, where possible, of which consultants should be used for which types of work;

l provide clear instructions about when and how ESI should be preserved. Earles v Barclays Bank plc illustrates that pre-action conduct is increasingly being taken into consideration by the courts when considering the question of costs. Accordingly, it is advisable to preserve ESI at an early stage, once the main issues have been established, in order to avoid adverse inferences being drawn.

In-house counsel work within a demanding, fast-paced and diverse environment where they may be called upon at short notice to produce ESI in answer to any number of official requests. In circumstances where the sanction against the organisation for not doing this in a full and timely manner, as in the present case, can be to incur costs penalties and/or to suffer reputational harm, it is imperative that in-house counsel begin to work more closely with information technology specialists to ensure that they are well equipped to deal with the burgeoning amount of electronic data generated by modern organisations.

Deborah Blaxell LL.B, Business Development Consultant, Epiq Systems.
Website: www.epiqsystems.com

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