From the Georgetown Law Advanced E-Discovery Institute: E-Discovery in Federal Investigations

 15 November 2009

The presentation was made by David Shonka (Principal Deputy General Counsel of the Federal Trade Commission), Miriam Smolen (associate general counsel in Fannie Mae’s litigation department, and in this role she manages complex commercial litigations and government investigations) and moderated by Andrew Goldsmith (First Assistant Chief in the Department of Justice).

David Shonka on the Government’s Civil Investigative Arsenal

Under the Federal Rules of Civil Procedure litigants in federal district court civil cases may use a broad assortment of tools for discovering information held by their opponents and by third parties; and courts have may apply a broad range of sanctions to compel, or at least encourage, cooperation.

In contrast, the Federal Rules do not apply when the government seeks information in a pre-complaint investigation and to secure information the government must depend on statutory grants of authority. Absent voluntary cooperation or statutory authority, the government is powerless to collect information before filing any legal action.

The Federal Trade Commission, which has a rather full range of information-gathering resources at its disposal, is a good example of both the breadth and limits of the government’s ability to discover information in a pre-complaint investigation. At one end of the spectrum, the agency’s statutes allow it to — and in practice the agency does — encourage voluntary cooperation in its investigations by issuing access letters which are unenforceable requests for information.  The Federal Trade Commission Act further encourages voluntary cooperation by assuring persons that the agency will provide information given “in place of compulsory process” the same level of confidential treatment that it provides to information it receives through compulsory process.

On the other end of the spectrum, the agency is authorized to issue orders directing  persons to submit “special reports” providing detailed information on their conduct and other matters.  Such orders are judicially enforceable 6 and failure to comply may result in the imposition of civil penalties, which accrue daily. 

In all its investigations, the agency also has the authority to issue civil investigation demands (“CIDs”) that may compel the recipient to provide information through interrogatory-style questions, produce documentary materials, or appear and give testimony at investigational hearings; and in its antitrust investigations, the agency additionally has the power to issue administrative subpoenas to compel the production of documents or the giving of testimony at investigational hearings almost anywhere in the country.

The premerger notification statute (Hart-Scott-Rodino to many of us in the biz) lies somewhere between “voluntary” and “compulsory.” On the one hand, the HSR Act authorizes the antitrust agencies to request detailed information relating to covered transactions. On the other hand, the parties are not required to respond to the requests – although they are forbidden to consummate their transaction unless and until they provide either all the requested information or a detailed statement of reasons why they cannot provide the information.

Failure to comply with the HSR reporting and waiting-period requirement may trigger a court action to enjoin the transaction until there has been compliance an action to rescind the transaction if it has been consummated, or a suit for substantial civil penalties, which accrue daily.

As the FTC’s example shows, by and large the government has the tools it needs to conduct its pre-complaint law enforcement investigations and it has had those tools for some time.

Access letters and subpoenas have been in the FTC’s tool box since the very beginning. It gained its CID authority in consumer protection cases in 1980 and in competition cases in 1994; and the HSR Act has been in effect since 1978. While the FTC’s investigative tools have remained constant since 1994, FTC antitrust investigations have grown in size and complexity.

In the mid-1990s, very few cases involved document productions exceeding one million pages and significant major merger investigations might have resulted in the production of a couple hundred boxes of documents. Today, FTC merger investigations may yield terabytes of information.

While some may argue that these numbers evince the growth of intrusive government regulation, two facts account for the government’s increased demand for information.   First, the public, the courts, and the Congress all (correctly) demand that the government justify its intrusions into private decision making with solid public interest justifications. In matters involving private economic activity this means agencies must base regulatory actions on evidence showing, in one form or another, that the public benefit from regulation is sufficient – or at least probable enough – to offset any private harm that may follow from the regulation.

Second, while the government once may have been able to prove a law violation in merger cases by simply showing an undue increase in four or eight firm concentration ratios, or even that a very large firm was acquiring a very small one, today the government must produce solid economic evidence showing in advance that a merger is actually likely to harm competition if consummated.  This requires sophisticated economic analysis and modeling. This evidentiary burden requires the government to collect substantial amounts of data and information.

One overarching principle underlies most law enforcement investigations. It is this: the government does not know the organizational structure of its target corporations, or their filing systems, or the manner in which electronic information is collected, distributed, analyzed, used, kept, and destroyed.  Its investigators must accordingly shape their requests for documents and information with that principle in mind. Therefore, their instructions on where to search for responsive files and information look something like this:

The corporation includes its domestic and foreign parents, predecessors, divisions, subsidiaries, affiliates, partnerships and joint ventures, and all directors, officers, employees, agents and representatives of the foregoing. The terms “subsidiary”,  “affiliate” and “joint venture” refer to any person in which there is partial (25 percent or more) or total ownership or control between the company and any other person.

Similarly, their instructions for producing computer files tend to look like this:

The term “computer files” includes information stored in, or accessible through, computer or other information retrieval systems. Thus, the company should produce documents that exist in machine-readable form, including documents stored in personal computers, portable computers, workstations, minicomputers, mainframes, servers, backup disks and tapes, archive disks and tapes, and other forms of offline storage, whether on or off company premises. Electronic mail messages should also be provided, even if only available on backup or archive tapes or disks. Computer files shall be printed and produced in hard copy or produced in machine-readable form (provided that Commission representatives determine prior to submission that it would be in a format that allows the agency to use the computer files), together with instructions and all other materials necessary to use or interpret the data.

Or this:

The term “document” means and includes all materials and information, including electronically stored information, discoverable under the Federal Rules of Civil Procedure. 

In short, the target must search every desk, person and file drawer, even in its affiliates’ offices as well as every computer, server, compact or floppy disc, blackberry, phone mail system, and other device that stores or holds electronic information. Unless the recipient of an investigative demand is prepared to face the potential consequences of conducting an inadequate search or of having important evidence obliterated, the recipient should open an immediate dialogue with the investigators.

Such a dialogue would address the following five subjects: (1) the scope of the search, (2) data retrieval issues, including email and phone mail, (3) timing, (4) the retention and disposition of legacy systems, archives, and back up tapes, (5) privilege logs, and (6) materials outside the United States.

Miriam Smolen on responding to government document requests

Your company is the subject of a subpoena or request for documents from a government agency. The company wants to be cooperative, but how does it negotiate search terms with the government?  Company counsel should contact the government investigators early to open discussions about what the expectation is for searching the collections. Typically, subpoenas and/or requests for documents are written in very broad language. The goal of an early conversation is to discover whatever is possible about what activities or events are under investigation, the specific time frames, and relevant custodians. Government investigators may already have a search term list. If they do not, counsel can suggest search terms that will be relevant to the investigation as described.

Investigators should want company counsel to be an active participant in the creation of search terms since counsel is familiar with the company’s documents and relevant personnel. While technology is vital to parsing through vast amounts of material, it can never replace subject matter experts. Computers cannot have the deep understanding of the issues or how documents play a role in the case. Thus, government investigators should, and usually do, want company counsel to suggest and run search terms against relevant custodians that will be responsive to the request for documents and information to help develop a global search term list.

Experienced e-discovery attorneys know that extra time is often needed to revise a search term list in response to tests of those terms and a review of the testing results.  However, more often than not, government investigators are pushing for quick responses.  If the need to be responsive prevents rounds of testing, use a dual prong approach: allocate your review resources to those results that appear to have used properly formulated search terms to begin review, and continue the testing and revision process for the other search terms. This should allow you to begin a rolling production of material sooner, but also allow for further revision.

What about when investigators require the use of thousands of search terms?  Providing statistics to the investigators summarizing the numbers of requests, and the volumes of material the searches have generated may help set expectations. It is not uncommon for a complex financial investigation to generate a government list of 2000 search terms or more that might generate millions of pages with hits. Of those millions, perhaps 20% will be responsive, which means that the company has paid a substantial amount for review of non-responsive material. While investigators may not be as concerned about cost as is the company, they will be concerned about slow productions.

Thus, discussing those numbers with the government may lead to a narrowing of the time frames, custodians or terms, which should reduce volume.

How do various government agencies differ in their approach to requesting and receiving documents?  While experience with responding to one government agency’s request for documents is useful, it does not necessarily help when responding to a different agency’s requests. There is no one common technology or application used by all government investigative agencies, and the level of experience among investigators also varies widely. Although some agencies, such as the Department of Justice, Federal Trade Commission and the SEC have guidelines for production, not all do, and even for those that do the guidelines provide general guidance for facilitating production.

The best advice is to obtain as much information as you can from the investigators, or agency attorneys, about the in-house technology available to them, and also about how they expect production to proceed. As early as possible, present a search plan and sample search results for initial review and discussion with the investigators. This should give you an idea of how they expect you to proceed.

Based on prior experiences, some investigators or agency staff may expect a level of service from outside counsel that extends toward responding to frequent detailed requests for particular documents.

Not all companies may have the resources to extend that level of service, but they do not want to be seen as uncooperative because of that.

Government subpoena or document requests are very broad.  Do they really expect a production of that magnitude?  Law enforcement document requests are extremely broad, both in terms of subject matter and time periods. The expectation is that the company will have a discussion with the investigators to focus on what is really needed. This discussion should continue throughout the production to ensure that the production is satisfactory, and to capture any new requests.

Date ranges are particularly tricky since expansion of date ranges mid-investigation can result in a tremendous amount of new work in terms of collection, new searches and additional review. To the extent possible early on, ensure investigators understand the cost and time involved in the effort generated by lengthening the date ranges; getting an early agreement on set date ranges can dramatically reduce the cost and time of a production.

In addition, as investigators dig deeper into the facts, their theory of the case or the focus of their investigation, may change. Ensuring that the company is producing what is relevant, and not spending the time on what is no longer important, will speed production and reduce cost.

How important is documenting the discussions with investigators and production efforts?  The most important piece of advice is to document every single step that your production team takes.

What if the privilege review process is challenged as too detailed and time-consuming?  It is fair to say that privilege reviews always take too long for government investigators, while for corporations there is never enough time to ensure complete accuracy. There are, however, several responses to this concern. One is to produce a rolling privilege log – the concern here is that later review of other documents may change the privilege decision that was completed earlier. Another approach is to provide the government with detailed information about the review: how many reviewers are assigned to this task, how many documents they can review a day, how long it takes to log or redact privileged material, the level of QC effort. It may also be worthwhile noting where an entry on a privilege log represents a whole “family” of documents and therefore the number of entries does not really reflect the level of effort. Providing such information should not compromise counsel’s review process, and it explains the length of the process in a satisfactory manner.

What about using new technologies for search beyond search terms, such as concept based searching?  As with most things, people do what they are comfortable doing. Many investigative staffs are comfortable with standard ediscovery techniques: search terms, time periods and custodians. However, as agencies become more familiar with newer technologies such as concept based searches there is every reason to believe that those types of searches will be approved as a mode of responding to document requests. Facilitating that change is the fact that the government always has newer attorneys joining from law firms and elsewhere that are more comfortable.

Two recommended articles:

“Investigations and Prosecutions Involving Electronically Stored” by the panel moderator Andrew Goldsmith (click here)

“E-Discovery in the Criminal Context: Considerations for Company Counsel”  (click here)