By Robert R. Simpson and Leander A. Dolphin[1]

The Initial Hold Letter

Communicate Before You Send Outside counsel eager to demonstrate their knowledge in the e-discovery area and to protect their interests may be inclined to shoot off a litigation hold letter to a client immediately after engagement (sometimes even in the engagement letter). This seems like a prudent thing to do after being thoroughly educated through countless e-discovery workshops, lectures, webinars, etc., right? Not so fast. Too often outside counsel lose sight of the fact that “the identification and preservation of potentially relevant information can be a complex undertaking.”[3] Before sending such a letter, did you advise the client it was coming? Did you discuss the scope of what should be preserved? Do you know the potential cost and business impact on your client to preserve everything in your letter? Do you know whether a similar letter/memorandum has already been sent internally that could potentially be in conflict with the notice you are sending?

Review and Retrieval

In-House and Outside Counsel Must Work in Harmony With the mounting pressure within legal departments to cut costs, many companies have decided to keep the search and retrieval function for relevant electronically stored information (ESI) inhouse. Although there is nothing inherently wrong with this approach, excluding outside counsel from understanding the search and retrieval process is problematic and may place in-house and outside counsel at odds.

Too often, outside counsel allow their clients to exclude them from the search and retrieval process in fear of placing a strain on the relationship. This is especially true where law firms allow senior associates to manage e-discovery issues with the client. How many associates (even partners) will be bold enough to tell the client that they must play a role in the search and retrieval process other than rubber stamping what in-house counsel has done? Unfortunately, outside counsel must take the risk of alienating good clients because the exposure is too great. After all, while a party to litigation has the duty to preserve, the oversight and accountability for ensuring preservation rests squarely on the shoulders of counsel. Indeed, in the seminal Zubulake case, the court held that “[c]ounsel must oversee compliance with the litigation hold, monitoring the party’s efforts to retain and produce the relevant documents.”[5]

Here, partnership between in-house and outside counsel is critical. Outside counsel cannot simply issue a litigation hold, and then rely on the representations of its client or in-house counsel regarding the client’s preservation efforts.[6] Rather, counsel must ensure: “(1) that all relevant information (or at least all sources of relevant information) is discovered; (2) that relevant information is retained on a continuing basis; and (3) that relevant non-privileged material is produced to the opposing party.”[7] In addition, the Federal Rules of Civil Procedure require that an attorney signing a disclosure or discovery response must certify “to the best of [her] knowledge, information and belief, formed after a reasonable inquiry” that the disclosure is “complete and correct as of the time it is made.”[8] In cases where in-house counsel is present, it is virtually impossible for outside counsel to meet these affirmative obligations without the cooperation and partnership of in-house counsel.

As evidenced by recent sanctions against both client and counsel in Qualcomm, Inc. v. Broadcom Corp.,[9] there is a lot at stake. In Qualcomm, a magistrate judge found that outside counsel had failed to properly search for and produce responsive documents during the course of discovery and that once they discovered that relevant documents existed, but had not been produced, they nevertheless continued to conceal the documents, while maintaining an argument based on false information to the court during the trial. In addition to levying an $8,568,633.24 monetary sanction against Qualcomm, the magistrate judge referred six of its outside lawyers to the State Bar of California for investigation into potential ethical violations.

Qualcomm is an extreme but cautionary tale, and we can all benefit from the unfortunate circumstances befalling the lawyers who litigated that case. While the conduct of Qualcomm’s attorneys seems outrageous, it is the apparently massive breakdown in communication between Qualcomm’s in-house and outside counsel that should serve as a clarion call to counsel who represent corporate clients. Clients and in-house counsel must act in good faith while cooperating with outside counsel to ensure proper adherence to the rules.

Cost vs. Conscience

The advent of e-discovery also has the consequence of forcing clients to pay their outside counsel extraordinary amounts of fees to review ESI. Given this economic climate, many clients simply cannot afford to pay six or seven figures for document review. Frankly, even in the best of times, clients will likely cringe at the sky-high costs of e-discovery document review by their attorneys. But we think that too many lawyers advise their clients that this is an absolute and necessary cost. We have heard many lawyers remark, “We can’t simply hand the documents over to opposing counsel without our review.” The response is simple: Yes, you can — after taking some necessary and appropriate precautions. Take, for example, one enormous and underutilized cost-saving procedure: the “quick peek” agreement. A “quick-peek” agreement is a cost effective method of shifting the costs of reviewing significant amounts of ESI to the opposing side.

This type of agreement allows the producing party to disclose ESI prior to a confidentiality or privilege review. This approach often presents a great deal of agitation for outside and in-house counsel. Some outside counsel believe that their ethical obligations to their clients to provide competent and diligent representation and to protect those clients’ confidential information are compromised.[10] Inhouse counsel and clients are concerned with the opposing party getting access to sensitive material and/or privileged information. It is true that quick peek agreements require “stringent guidelines and restrictions to prevent the waiver of confidentiality and privilege.” [11] To address these concerns, counsel should include a “clawback” provision in the quick peek agreement, and, if necessary, enter into a protective order.[12]

A clawback provision allows the producing party to pull back privileged documents, without waiving the asserted privilege. There is added protection in Federal Rule of Evidence 502, which provides protection in the event of inadvertent disclosure of privileged information. Without minimizing the concerns raised by the use of agreements and clawback provisions, these are strong cost-controlling vehicles, which, if done properly, can balance the competing need to manage costs and protect client confidences. This is another area where in-house and outside counsel must make sure they are on the same page. Employing a quick peek agreement and clawback provision is an important strategic tool, and while clients must appreciate their obligations to produce, outside counsel must appreciate a client’s need to control how much it spends in fees.

Concluding Thoughts

These are just a few areas where ethics and e-discovery overlap. The underlying theme in each of these areas is communication. Although this article focuses on the communication between outside and in-house counsel, you should also remember that communication with opposing counsel and the court, each with accompanying ethical issues, are also critical throughout the e-discovery process.

References

[1] Robert R. Simpson is a partner in the law firm of Shipman & Goodwin LLP, where he is a member of the Litigation Department. Attorney Simpson’s practice focuses on product liability, employment and business litigation. He is a member of The Sedona Conference Working Group on Electronic Document Retention & Production (WG1). He frequently lectures and counsels clients on e-discovery issues. Leander A. Dolphin is an associate at Shipman & Goodwin LLP. Attorney Dolphin practices in the areas of civil litigation, providing representation in general business and employment law litigation matters.
[2] There is a wealth of commentary on e-discovery and how to navigate the e-discovery rules. Excellent resources include the work of the Sedona Conference Working Group on Electronic Document Retention and Production (WG1); Steven A. Weiss, Ten Electronic Discovery Cases You Should Read, ABA Litigation (2007); and John M. Barkett, THE ETHICS OF E-DISCOVERY (2009) to name just a few.
[3] The Sedona Commentary on Legal Holds: The Trigger and the Process, A Project of the Sedona Conference Working Group on Electronic Document Retention & Production (WG1) (2007).
[4] Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003) (Zubulake IV) (“Must a corporation, upon recognizing the threat of litigation, preserve every shred of paper, every e-mail or electronic document, and every backup tape? The answer is clearly, ‘no.’ Such a rule would cripple large corporations….”).
[5] Zubulake v. UBS Warburg, 229 F.R.D. 422, 432 (S.D.N.Y. 2004) (Zubulake V).
[6] See, e.g., Phoenix Four, Inc. v. Strategic Res. Corp., No. 05 Civ. 4837 (H, 2006 U.S. Dist. LEXIS 32211, at *17 (S.D.N.Y. May 23, 2006) (“[c]ounsel’s obligation is not confined to a request for documents; the duty is to search for sources of information).
[7] Zubulake V, 229 F.R.D. at 432.
[8] Fed. R. Civ. Proc. R. 26(g); see also, Advisory Cmte. Notes (1983 Amendment) (noting that “Rule 26(g) imposes an affirmative duty to engage in pretrial discovery in a responsible manner that is consistent with the spirit and purposes of Rules 26 through 37”).
[9] Qualcomm, Inc. v. Broadcom Corp., No. 05cv1958-B (BLM), 2008 U.S. Dist. LEXIS 911 (S.D.Ca. Jan. 7, 2008) (imposing an $8,568,633.24 sanction against Qualcomm and referring six outside counsel to the State Bar of California for investigation of possible ethical violations).
[10] MODEL RULES OF PROF’L CONDUCT R. 1.1, 1.6 (2008).
[11] The Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Document Production, cmt.10d (2007).
[12] Note also that not all jurisdictions endorse the use of quick-peek agreements, citing the voluntary disclosure of confidential and/or privileged information. Before entering into a quick-peek agreement, counsel should be familiar with the laws of the jurisdiction in which they practice. But see Fed. R. Evid. 502 advisory committee’s notes subdivisions (d) and (e) (providing that a court order will protect disclosures made pursuant to the order).