William A. Ruskin: Hand Over The Cash Or The Hard Drive Gets It!

William A. Ruskin: Hand Over The Cash Or The Hard Drive Gets It!

By William A. Ruskin |

In January 2013, GlaxoSmithKline (“GSK”) filed a complaint in New York state court alleging that its e-discovery vendor, Discovery Works Legal Inc., was “holding hostage over 20 terabytes of GSK’s most sensitive and confidential data, and threatened to withhold and destroy the data" unless GSK paid a ransom of more than $80,000. GSK is the second largest pharmaceutical company in the world by revenue, employing over 100,000 people in 117 countries. How could a mere  e-discovery vendor hold GSK's data hostage?

Reportedly, Discovery Works is in control of roughly 3.75 billion pages of GSK documents in “unknown” locations. As Law360 reporter Andrew Strickler summarized the threat (and thereby inspired the title of this article)  “Hand over the cash or the hard drive gets it!”

In the case, GlaxoSmithKline LLC v. Discovery Works Legal Inc., et al., Case No. 650210/2013, Judge Shirley Werner Kornreich, who sits in New York County’s Commercial Part, sounded a note of caution, in a ruling on the case on September 25, 2013,  about the customary practice of corporations and law firms to outsource their electronic discovery to e-discovery vendors. She said that GSK’s experience with its vendor was a “cautionary tale.” She noted that GSK’s data is stored in far flung locations in a raw, uncoded form that is not indexed in any way, which makes it hard to retrieve without considerable IT work.

“It’s a frightening thought,” she said, that a multi-national company like GSK could find so much of its data in peril due to an e-discovery vendor’s failure and/or refusal to provide the data in usable form. Judge Kornreich urged GSK and others to rewrite their contracts to give themselves more protection with e-discovery vendors by requiring them to keep an index of all of the data the vendors are managing for the client.

However, having a good contract with the vendor is just the start. A company is legally obligated to be able to produce all relevant discovery, including ESI, in litigation. What happens when the vendor is unwilling or unable to provide the client with the data required for discovery? What if the discovery vendor shuts its doors? Will the company be hit with spoliation of evidence sanctions? How would Judge Shira Scheindlin respond if presented with a motion for spoliation sanctions? The short answer is that it probably depends on the circumstances.

But one thing is clear.  I would not want to be the lawyer who retained a problem-some vendor for my client. What due diligence should a law firm perform to ensure that the discovery vendor is a responsible choice for a client? Clearly, the lowest bid cannot be the determinant of what e-discovery vendor is selected, particularly after case,  Additionally, I would be unlikely to hire a small firm (no matter how brilliant and innovative the principals) because the firm's stability and solvency over the long haul is a critical consideration. 

As Michael G. Van Arsdall at Crowell and Moring wrote recently: “There is a very low likelihood such a hostage situation would ever arise with the large number of reputable vendors that occupy the e-discovery space.” That said, Mr. Arsdall recommends some actions that companies can take to mitigate the risk, or, alternatively, provide the company or the law firm the opportunity to switch e-discovery vendors, if necessary. These actions include:

1. Insisting that the original collection media provided to the vendor (e.g., hard drives) be returned to the law firm or company for safekeeping;
2. Maintaining a copy of all production sets produced;
3. Negotiating reasonable archiving fees upfront, and require that at the end of the matter (or at reasonable intervals during the engagement) an archive set of the data is provided to the company or law firm for safekeeping; and
4. Requiring the vendor to certify that it has destroyed or returned all the company’s data at the conclusion of the matter or at the company’s or law firm’s instruction.

We are all increasingly tied at the hip to our e-discovery vendors in one form or another today. The e-discovery vendor is an important member of the litigation team. If, for any reason, the e-discovery vendor falters in its obligations, the entire team may suffer adverse consequences.

For more cutting edge commentary on developing issues, visit Toxic Tort Litigation Blog by William A. Ruskin of Epstein Becker & Green.

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