Krantz Featured in ComplianceResources.org’s “Comply With Me” Column

[Reprinted with Permission from ComplianceResources.org]

Comply With Me - Ask the Compliance Expert

From time to time, we invite experts in the industry to share their views and opinions about their experiences on compliance and electronic discovery (ED) trends and issues.

This "Comply With Me" column features:
Brett S. Krantz, Esq.
Partner, Kohrman, Jackson & Krantz P.L.L.

Background:
As a partner at Kohrman, Jackson & Krantz, Brett brings extensive experience in counseling and commercial litigation, covering areas including securities, unfair-competition, unfair trade practices and trade secrets, franchise disputes, breach of contract, common-law torts and alternative dispute resolution. Among other important cases, Brett represented the shareholder class in the nationally publicized securities class action against Telxon Corporation and its former "big four" auditor, PricewaterhouseCoopers. This matter resulted in one of the most significant e-discovery decisions in American jurisprudence history and already has had a major impact on how clients and their counsel deal with e-discovery issues.

Brett began his law practice in Washington, D.C., at the firm of Patton Boggs, where he spent seven years focused on complex commercial litigation. He later returned home to Cleveland, Ohio, and joined a firm where he was a shareholder and represented individuals and entities from around the world in commercial disputes and securities issues. A graduate of Dartmouth College, Brett received his law degree from the University of Chicago Law School.

Interview Focus:

E-Discovery and Compliance Response Issues

Featured Interview:

CR.ORG: How can outside counsel work with clients to educate them on best practices for responding to electronic discovery (ED) requests?

KRANTZ: Best practices start long before receiving an ED request. Clients should get outside counsel and information technology personnel involved in assessing document retention policies, as well as detailed data storage and data management plans. Attempting to resolve electronic discovery issues after a request is received is too late, too costly and too risky.

CR.ORG: What are the first steps in the process?

KRANTZ: The first step in responding to a threat of litigation (and not waiting for an ED document request) is to make sure that all data is frozen and not subject to alteration. Not having a handle on where your data resides (see number 1 above), or how it can be altered, can be a billion-dollar problem. Just ask Morgan Stanley. See Coleman Holdings, Inc. v. Morgan Stanley & Co., Inc. (In that case, the judge instructed the jury that Morgan Stanley had concealed e-mails. The jury returned a $1.45 billion verdict against the company.)

CR.ORG: At what point in the process would you involve IT or outside parties, such as an ED vendor?

KRANTZ: Whether or not outside parties, such as ED vendors, need to get involved depends upon the type of client, as well as the size and scope of the case. If someone outside the company is necessary, the earlier in the process they get involved, the better. An expert in the area can help construct discovery requests and make sure your client is getting the information they really need.

CR.ORG: Are there specific rule changes or court orders that will impact how clients must respond to ED in the future?

KRANTZ: E-discovery is a quickly changing area. Federal rules, as well as some state rules, are being looked at and altered to apply to this electronic age. The Judicial Conference approved proposed federal rules changes in September 2005, and, if timely adopted by the Supreme Court, these rules will be effective beginning in December 2006. Some of these changes include: (1) a requirement that, prior to a discovery request, the parties exchange a copy of, or description by category and location of, electronically stored information; (2) at the beginning of the case, the parties discuss any issues relating to preserving information and the disclosure and discovery of electronic communication; (3) a rule stating if the cost is too "high," electronically stored information need not be provided; (4) the right to test or sample electronically stored information in a usable format; and (5) a rule that provides that absent extraordinary circumstances, sanctions may not be imposed for failing to provide electronic information lost as a result of the routine operation of the responding parties' electronic information system. Courts are dealing with tough issues, such as who pays for e-discovery and what information (for example metadata) needs to be produced. This is an evolving area of the law, and entities need to pay great attention to the ever changing expectations of courts and parties.

CR.ORG: Do you have a scenario or case example of ED processes and successful outcomes?

KRANTZ: Although I am principally a defense counsel, I recently represented a class in a securities class action. PricewaterhouseCoopers (PwC), a defendant, continually affirmed to the court and the parties involved that the organization had produced all documents, including those they maintained electronically. As the organization was eventually forced to admit, these representations were not true, and documents retained electronically had not been produced. This also meant that PwC was unable to explain the source or authenticate some of the hard-copy documents produced. As a result, the magistrate judge, in what can be described as a scathing opinion, recommended that a default judgment be entered against PwC. Ultimately, before the judge had an opportunity to rule on this recommendation, PwC settled the claims against it for nearly $50 million.

CR.ORG: What's your number one piece of advice for companies that face frequent litigation?

KRANTZ: All counsel and parties should be aware of the risk of not maintaining, preserving and producing the responsive electronic data. To understand that risk, please download a copy of the Magistrates Recommendation in the PwC case discussed above. (Click here to download recommendation.) A basic understanding of these risks also means a reading of the Zubulake opinions and the Metropolitan Opera case, which should put everyone on notice of their obligations (and risk from the failure to meet these obligations) concerning discovery and electronic communications.