18 May 2010 — Ralph Losey has designed and created an online class for law school on the subject of electronic discovery. It is a three-credit course, entirely online, named Introduction to Electronic Discovery.  The students can take this course from anywhere, and can do so asynchronously.

At present, the course is offered by the University of Florida, Levin College of Law, and is only open to U.F. law students. This is the first online course the U.F. law school has ever offered on any subject except for Legal Research. Ralph Has written extensively about the high effectiveness of online instruction, especially in graduate level programs (see, for instance, his article Why Online Education Will Surpass Traditional Face-to-Face Education in the Next 5-10 Years).  And it is in keeping with other posts on Ralph’s site regarding e-discovery and the challenge to U.S. law schools.

For the full article about Ralph’s electronic discovery course click here.

4 May 2010 —  Very often Posse List members get so caught up in the nuts & bolts of e-discovery they don’t get an overall perspective of the trends of e-discovery and litigation.  How important is e-discovery to the litigation process?  Is extensive e-discovery threatened just to lead to settlement in order to avoid discovery costs?  Does e-discovery every lead to the “smoking gun”?  Do cases commence with e-discovery simply as an investigative tool to see whether or not facts could be developed that would justify bringing the case? 

This month’s issue of The Metropolitan Corporate Counsel has two very good interviews that address these issues and more. 

First is an interview with Alan Naar, Vice Chair of the Litigation Department of Greenbaum Rowe.  For a link to the full article click here. 

Second is an interview with Peter Marketos, litigation partner in the Litigation Department of Haynes and Boone.  For a full link to the full article click here.

There has been an interesting conversation going on about the recommended path for an experienced e-discovery attorney to transition from law practice into a more technical litigation support or e-discovery consultant/project manager role.  It has been a discussion thread on the e-LEGAL group on LinkedIn and Paul Easton has a post about it this past week (click here).

It also ties in nicely with the May 13^th CLE program being offered by the Association of Corporate Counsel that will discuss project management within the legal profession (click here).   We are arranging a discount for Posse List members to attend.

The Posse List has always run a listserv for e-discovery Project Manager positions ( to subscribe click here).   But due to demand but we now have a listserv for Legal IT jobs that require a JD or equivalent experience (to subscribe click here). 

The first task in any transition to to understand the technology.  All of us have been exposed to some of the technical hurdles that litigation support teams face, but you need a deeper understanding of them.  One way to do that is learn how data is processed for a case. We post numerous webinars and webcasts on technical training.  Learn how to process data using a tool like Law 5.0 software (click here).   

You need to grasp the technical challenges that are presented by the data processing process.  Along the same lines, learn about data acquisition and preservation methodologies. You know how important a chain of custody is and why the hash value of the data you present in court needs to match what was initially acquired.  But can you make a bitstream copy of a client’s hard drive with a full audit trail? 

The biggest issue for attorneys making the transition is the need to bridge the gap between legal and technical within e-discovery.   Access our Electronic Reading Room site (click here) to bone up on the basics – and the advanced bits – of e-discovery.

As you will see in Paul’s post, Craig Blakeley of Kroll On Track outlines what Kroll looks for in Litigation Support Project Managers.  We agree with Paul that is one of the few e-discovery project management job descriptions that specifically lists Project Management Professional (PMP) certification. For more on PMP click here.  And as Paul has mentioned in other posts, the closest you’ll find to a description of litigation support in the U.S. Dept. of Labor’s O*NET database (click here)  are here:

23-2011.00 – Paralegals and Legal Assistants  (click here)

23-2099.00 – Legal Support Workers, All Other  (click here) 

But defining “litigation support” is pretty impossible given it is such a broad field.  However (again repeating Paul) if you focus specifically on e-discovery project management positions — taking into consideration what we post on The Posse List as well as other litigation support specific job boards sponsored by the Association of Litigation Support Professionals, , the Cowen Group, etc. — you’ll see that for most employers experience trumps education.  Many do not list degree requirements at all.  As for certifications, now and then, you may see “PMP preferred” but it is the exception not the rule.

Granted, a JD + document review experience means the most common project management position will be found in legal staffing and LPO companies.   But the ever increasing number of e-discovery companies/litigation support companies providing staffing as part of their “all-in-one e-discovery package” means opportunity, too — what Paul calls the “lawyerfication” of these positions.

Software-specific certifications (Concordance, Ringtail, etc.) always seem to carry more weight and almost all of the project management/litigation support jobs we post make specific software experience a requirement.  And large law firm experience does carry the most weight, followed by experience with a litigation support vendor.

So get training in some of the most common litigation-support software (we post webinars and webcasts all the time) plus do whatever you can to work on participating in/managing specific elements of document review (priv team, special projects, post-production) and any technical aspect of litigation support projects.  

Last week saw the release of the 2,200-page report by Anton Valukas on the Lehman Brothers collapse.  Valukas was appointed examiner by the U.S. Bankruptcy Trustee probing the reasons for Lehman’s failure in September 2008.

Note: Examiners in bankruptcy cases are appointed to investigate accusations of wrongdoing or misconduct. Their job is to determine whether creditors can recover more money in these cases, and their findings often serve as guides for more lawsuits and even regulatory action.  Mr Valukas is a Jenner and Block lawyer who specializes in criminal law and business litigation.

The report took one year and cost $38 million and it paints a damning portrait of the role of Wall Street and London’s financial center and the off balance-sheet trades used to mask Lehman’s true financial condition.

The report is nine volumes and 2,200 pages but downloaded quite quickly to our iPad.  We are spending most of weekend reading it.

Repo 105

There is extensive media coverage of the report so we won’t labor through all the details, and as we have previously reported there are a large number of civil lawsuits and government investigations underway, all  employing a boatload of contract attorneys, accountants and forensics specialists.  Preparation of the report required 70+ contract attorneys.

But in summary, the big item is the revelation of a particularly aggressive accounting practice, known internally as “Repo 105” that Valukas said helped the investment bank mask the true depths of its financial woes.   Over hundreds of pages (all in Volume 3 by the way),  Valukas details the genesis of and the process behind Repo 105.  

Based on standard repurchase agreements (repo) — short-term loans commonly used by many firms for daily financing needs, in which borrowers temporarily exchange assets in return for cash up front — Lehman took a particularly aggressive accounting approach to these transactions.    The controversy stems from whether the agreements can be booked as a sale, or whether they should be treated as asset financings.  Lehman used repos to temporarily park assets off its books to make its end-of-quarter debt levels look better than they did — while calling them sales instead of loans.   So they temporarily removed securities inventory from the balance sheet, usually for a period of seven to ten days, and to create a materially misleading picture of the firm’s financial condition in late 2007 and 2008.

Repo transactions that Lehman (and other investment banks) use are normal to secure short‐term financing.  But with a critical difference: Lehman accounted for Repo 105 transactions as “sales” as opposed to financing transactions based upon the overcollateralization or higher than normal haircut in a Repo 105 transaction. By recharacterizing the Repo 105 transaction as a “sale,” Lehman removed the inventory from its balance sheet.  So they reduced its publicly reported net leverage and balance sheet.  Lehman’s periodic reports did not disclose the cash borrowing from the Repo 105 transaction – i.e., although Lehman had in effect borrowed tens of billions of dollars in these transactions, Lehman did not disclose the known obligation to repay the debt.   Lehman used the cash from the Repo 105 transaction to pay down other liabilities, thereby reducing both the total liabilities and the total assets reported on its balance sheet and lowering its leverage ratios.   Lehman never publicly disclosed its use of Repo 105 transactions, or its accounting treatment for these transactions. 

You can see why Repo 105 would be a tempting thing in the midst of a brewing financial crisis.  Leverage had become a focus of the ratings agencies and was widely thought to be an indicator of bank risk, which meant Lehman would have been hell-bent on reducing its leverage — at least publicly.  At the same time prices for things like CMBS and subprime loans were falling and/or illiquid – Lehman could not have reduced its balance sheet simply by selling things off without incurring large losses.  Hence the repo, which the bank increasingly used between 2007 and 2008 — even breaching its own internal cap on the repo’s use (about $22bn as of summer 2006). 

But there was a catch …

One catch.  According to Valukas, no American law firm would sign off on its use.  Enter Linklaters (a highly respected British law firm) who gives Lehman the answer it wanted: so long as the repos were conducted in London through the bank’s European arm, and so long as the company took other cosmetic steps to make these transactions appear to be sales instead of financings, Linklaters determined that they would pass regulatory muster.

Linklaters reply to the report findings:  the firm was not contacted by Valukas and its legal opinions were not criticized in the examiner’s report as wrong or improper.

Valukas deems Richard Fuld (Lehman chairman and chief executive officer) “at least grossly negligent” in his role overseeing Lehman.  Fuld’s lawyer said my client “did not know what those transactions were — he didn’t structure or negotiate them, nor was he aware of their accounting treatment.”   Although elsewhere in the report there is discussion of  emails Fuld received with documents concerning the transactions,  Fuld’s attorney came up with what will be the #1 excuse for all CEOs going forward:  Fuld “did not use a computer” and “he cannot open attachments on his BlackBerry”. 

Note:  for an excellent treatment of why Lehman’s use of the accounting rule can’t be explained away as a legal technicalitybut goes to the heart of the legal culture in the UK see this post from the IFLR Bulletin by clicking here.

The e-discovery elements

But the most intriguing part of the report we have read concerns the sheer size of the data  and the search methodology/software  used in examining the documents.  Valukus’s report was a mammoth task involving e-mails, reports, data sets and interviews.  Answering the questions required an extensive investigation and review of Lehman’s operating, trading, valuation, financial, accounting and other data systems.  Interrogating those systems proved particularly challenging, first because the vast majority of the systems had been transferred and were under the control of Barclays (who took over a large part of Lehman operating units);  by the time of the Valukas’ appointment, Barclays had integrated its own proprietary and confidential data into some of the systems, so Barclays had legitimate concerns about granting access to those systems.

The second challenge was more daunting. At the time of its bankruptcy filing, Lehman maintained a patchwork of over 2,600 software systems and applications.  It was decided early on that it would not be cost effective to undertake the enormous effort and expense that would be required to learn and access each of these 2,600 systems. Rather, Valukas directed his financial advisors to identify and acquire an in‐depth understanding of the most promising of the systems.

How the review was conducted:

1. The available universe of Lehman e‐mail and other electronically stored documents is estimated at three petabytes of data — roughly the equivalent of 350 billion pages.  For perspective, a petabyte represents one quadrillion bytes, and is three orders of magnitude larger than a terabyte.  The entire text content of the Library of Congress has been estimated at 20 terabytes.  So Lehman’s archives were 150 times larger than one of the largest libraries in the world.
2. Valukus carefully selected a group of document custodians and search terms designed to cull out the most promising subset of Lehman electronic materials for review. In addition, Valukus requested and received hard copy documents from Lehman and both electronic and hard copy documents from numerous third parties and government agencies.
3. In total, the Examiner collected in excess of five million documents, estimated to comprise more than 40,000,000 pages. All of these documents have been converted to electronic form and are maintained on two computerized databases, Stratify and CaseLogistix.
4. Documents were reviewed on at least two levels. First level review was conducted by lawyers trained to identify documents of possible interest and to code the substantive areas to which the documents pertained; those so identified were subjected to further and more careful review by lawyers or financial advisors especially immersed in the earmarked subjects. In order to reduce the cost of review, the Valukus sought and obtained the court’s approval to retain contract attorneys.  A group of more than 70 contract attorneys, supplemented by Jenner & Block attorneys, conducted first level reviews.
5. All second level (and beyond) reviews were performed by Jenner & Block attorneys or Duff & Phelps professionals.  Valukus estimates that he has reviewed approximately 34,000,000 pages of documents in the course of his investigation.
6. The entire body of e-mail in the Stratify database —  4,439,924 documents, approximately 26 million pages— has been reviewed.   Approximately 340,000 of the CaseLogistix documents — roughly eight million pages — have been reviewed.
7. Although a large number of the CaseLogistix documents were not reviewed, that database is fully searchable, and Valukus is reasonably confident that the repeated and focused searches applied against that database have discovered most if not all of the most relevant documents.
8. In most cases, documents were produced to Valukus under stipulated protective orders, which are described in Appendix 5 of the report. Subject to those orders, the document databases created remain a resource for the bankruptcy estate and the parties. The database includes computerized tagging which will allow persons interested in making their own searches to narrow and focus search requests.

Note:  details of the expenses including the cost of contract attorneys and search costs are detailed in the bankruptcy fee filings which will we include in further updates to this post.  It will interesting to analyze what cost savings might have been possible had Valukas used such methodologies as Recommind’s predictive coding (click here and click here), or perhaps used Index Engines full content/metadata indexing platforms (click here and click here) to access each of Lehman’s 2,600 software systems. 

Valukas smoothes way to legal action

The Valukas report has armed the regulators and the plaintiff bar with vital information.  And we still haven’t seen the separate SEC report due out shortly.   But there is little doubt his report will make it easier and cheaper for others to build their cases.  The SEC  and DOJ investigators have already indicated the Valukas’ work will speed up the completion of their own report.    They can analyse what the evidence shows or proves rather than cope with the burden of simply collecting the evidence — often the hardest task in a case of this size.   This will help them to make a concrete determination whether there were false and misleading statements about Lehman’s financial condition and whether or who they should charge, either on a civil or criminal basis.

The report may also help determine whether the Lehman bankruptcy estate can sue individuals to recover some of the firm’s losses on behalf of its creditors. Litigation specialists suggested that the report might embolden the trustee for Lehman’s estate to sue professional firms in an attempt to recoup losses suffered by creditors.  Posse List members will recall that after the 2005 collapse of Refco, an examiner’s report helped prompt lawsuits against a number of the defunct commodities broker’s legal and accounting advisers, as well as against individuals in the company.

One interesting note:  Valukas met the SEC and the two US attorney offices (New York and New Jersey) investigating the case to establish protocols for clearing proposed interviews so as not to interfere with any ongoing investigations.   

Still to come …

The report makes fascinating reading on many levels.   We are continuing our read.  We will amend this post as more information is obtained especially anything we find regarding the e-discovery aspects.

Reported by:  Gregory P. Bufithis   Founder/Chairman  The Posse List

As more and more attorneys, law firms, corporations and vendors join the Posse List and exisiting Posse List members move into the nuts and bolts of the tech side of e-discovery, we thought we’d update our e-discovery “primer” posts.  In an e-discovery review, the collections process and its attendant considerations are paramount.  But just what, exactly, are you “collecting” and just what is ESI, information and data?

To get you started, Rob Robinson (Senior Director of Worldwide Marketing for Applied Discovery)  has a great Scribd post titled ”Considering ESI, Information, and Data?”   It is a very authoritative review of the whole collection process with some excellent reference notes on further sources.  You can access the post by clicking here.   As we have mentioned before, Rob is pretty much the doyen of all-things-ediscovery and you can follow him on Twitter by clicking here or via his web site by clicking here.

Another great reference we recommend is The Sedona Conference E-Discovery & Digital Information Management Glossary which you can access here.

As recently highlighted by Sharon Nelson on her excellent blog Ride the Lightening one of the things Craig Ball most enjoys is coming up with a challenging e-discovery hypothetical and then confounding some of his fellow luminaries in the EDD world.  For Sharon’s full post click here.

The Edna challenge involves an old school chum who runs a small law firm. She wants to conduct an in-house review of ESI in a fairly small case. Craig outlines the facts, the technology available and the budget and then asks “How Should Edna proceed?”  Sharon’s post has a link to the challenge.

Craig addresses a key point in the e-discovery world.  As he says “a hurdle [for most] is the unavailability and high cost of specialized software to process and review electronic evidence”.   What Craig does through his article/challenge is explore affordable, off-the-shelf ways to get where you need to go in e-discovery.  As Craig says, few cases involve millions of files. Most entail review of material collected from a handful of custodians in familiar productivity formats like Outlook e-mail, Word documents, Excel spreadsheets and PowerPoint presentations.

Craig concluding point:  vendors have not yet built a proper tool for those who need to perform “do it yourself” ESI review.  Why are they ignoring 85% of the market?

It’s a great piece and (as always) from a Craig Ball article you learn a lot about e-discovery.

The January issue of the Journal of the American Society for Information Science and Technology has an article by Herb Roitblat, Anne Kershaw, and Patrick Oot describing a study that compared computer classification of e-discovery documents with manual review.  It found that computer classification was at least as consistent as human review was at distinguishing responsive from nonresponsive documents. 

Anne Kershaw discussed many of these issues at the Georgetown University Advanced E-Discovery Institute last year (click here) and Patrick Oot presented some preliminary findings from the aticle at the IQPC eDiscovery Conference in December.   We hope to interview them at LegalTech (click here). 

The documents used in the study were collected in response to a “Second Request” concerning Verizon’s acquisition of MCI.  The documents were collected from 83 employees in 10 US states.  Together they consisted of 1.3 terabytes of electronic files in the form of 2,319,346 documents.

For an overview of the study click here.  For a full copy of the study click here .

Charles Skamser, author of the blog The eDiscovery Paradigm, has blogged over the past several months about the emergence of “Hal 900 like” experiences in e-discovery and Web 3.0.   In his blog post on the study he states “one system agreed with the original classification on 83.2% of the documents and the other on 83.6%. Like the human review teams, about half of the documents identified as responsive by the original review were similarly classified by the computer systems”.   For his full post and links to his other analysis of the utilization of semantic and related technology to reduce the cost of document review through computer aided document categorization click here.

The problem for document review contract attorneys is that the results imply that using a computer-based classification system is a viable way to produce a reasonable categorization.   This development, coupled with similar work being done by Google and Microsoft, could mean that the task of document review, as echoed by Charles Skamser, “could indeed be in the process of evolving to the next level of computer aided automation”.

Last week we posted an article by Robert Owen, a partner with Fulbright & Jaworski.   He is head of the New York location’s litigation group, as well as co-head of the firm’s E-Discovery and Information Management practice group.  Owen is part of the core team that conceived of and has administered Fulbright’s Annual Litigation Trends Survey since its inception in 2004.

The article, titled “Seeking Ways to Set Limits on E-Discovery”, examines the current initiatives underway that re-examine full disclosure and the U.S. procedural rules focusing on the growing costs and complexity of federal civil pretrial discovery procedures.  Is there a need for modifications or alternatives to our present system?

For the full post from the New York Law Journal as posted by LTN Law Technology News click here.

In follow-up to that article, Ari Kaplan interviewed Mr. Owen and you can hear that interview by clicking here.

Ralph Losey has produced a six minute video from the last day of his class on e-discovery at the University of Florida. Holland & Knight’s William Hamilton and Ralph serve as adjunct professors at the College of Law to try to pass on what they know about the subject to the next generation.   According to Ralph “a basic understand of the subject takes a few hundred hours and, if a student works hard, can be accomplished in one semester. According to Malcolm Gladwell, and I agree, mastery of any complex task like this takes 10,000 hours”.

For Ralph’s video click here.

Paul Easton has been compiling some excellent sites that list project/matter management applications including Mark Kerzner’s “Legal Technology” blog.  Last month Kerzner launched “LitSupport Q & A” that provides this information in a question and answer format as a free service to the litigation support community. One of the first answers published is a list of “EDD Project Tracking Dashboard software.”

For Paul’s full post click here.