October 2007 Newsletter

New Rules for eDiscovery

Changes in Federal Rules of Civil Procedure relating to electronic discovery present new opportunities to gather relevant facts.

Definition

Digital evidence is now referred to as, “electronically stored information” (ESI) rather than using the generic “documents” definition under Rule 34(a). ESI is not limited to just a computer as relevant information can be stored on a multitude of devices. For example, blackberries, thumb drives, and remote desktop access are the standard to keep pace with the speed of business. Are your discovery efforts looking in all the right places? Do you have an inventory of the electronic devices?

Specified Format

The committee writing the new rules understood the importance of metadata (associated information about a file) and its relation to the discovery process. Under Rule 34(b), they added the ability to specify the form in which electronically stored information is produced. The request should include the file in its native format with its accompanying metadata intact. Metadata often contains evidence (dates, times, and other information about the file) that can be just as important as the contents of a file. Are you asking for the native format? Does opposing counsel present issues as to the format?

Early Attention

Digital evidence can be perishable and needs to be preserved as soon as possible. Changes set out procedures for addressing electronically stored information early in the process. The change to Rule 16(b) includes requests for electronically stored information to be addressed shortly after the complaint has been filed. Once potential evidence has been preserved, the analysis can take place at any point in the process. However without taking those first steps early, it may be extremely difficult and more expensive to try and turn back the clock. Do you and your client have a reliable plan to preserve your ESI? Should a forensic expert be involved at the time the original complaint is filed?

Safe Harbor

Rule 37 (f) sets out relief from sanctions if information is lost as part of the routine, good faith operation of the electronically stored information system. Experts are predicting that courts will heavily scrutinize a company’s policy and normal practice to determine if the deletion was truly normal operations or attempts to thwart the discovery process. Have you established what practice exists? Is it documented and verified?

Privilege Issues

Rule 26(b)(5) sets out handling procedures for the prompt return, sequestration, or destruction of privileged material that is inadvertently provided as part of the discovery process. How can your production process better protect against inadvertent disclosure?

Reasonably Accessible

A party does not have to provide electronically stored information from sources that are not reasonably accessible because of undue burden or cost. Rule 26(b)(2) requires that the party would have to identify these sources and has the burden to show why they can’t get the information. For example, shutting down a server may cause undue harm to a business if they are not able to function. You likely need an expert to support this defense.

If you are your clients would like assistance in the area of eDiscovery, please contact Paul Price of J.A. Compton & Co. at 713-351-7150.

Class Action Representative and Assigned Claims

Case: Cordes & Company Financial Services, Inc. and EqualNet Communications Corporation, on behalf of themselves and all others similarly situated v. A.G. Edwards & Sons, Inc., et al.

The interests of the second named plaintiff, EqualNet Communications Corporation (“EqualNet”) are being pursued by the Unsecured Creditors Trust (“Creditors Trust”) of a subsidiary of EqualNet: EqualNet Corp. Jeff Compton is the Trustee of the Creditors Trust and was deposed in the case.

The plaintiffs allege in their Consolidated Class Action Complaint that the defendants, who are initial public offering (“IPO”) underwriters, violated Section 1 of the Sherman Act, 15 U.S.C. § 1, by agreeing to charge all corporations conducting mid-size IPOs (i.e., IPOs generating between $20 million and $80 million in proceeds) who used their services a fee equal to seven percent of the proceeds of the offering. Plaintiffs sought class certification pursuant to Federal Rule of Civil Procedure 23. The United States District Court for the Southern District of New York denied the motion for class certification because, it concluded, two Rule 23 requirements, the adequacy requirement of Rule 23(a)(4) and the predominance requirement of Rule 23(b)(3), were not met.

The United States Court of Appeals for the 2nd Circuit held that Western Pacific and EqualNet were both members of the class. As a result of Western Pacific’s and EqualNet’s assignments of their respective claims and interests in this litigation to Cordes and Creditors Trust, Cordes and Creditors Trust stood before the district court in the shoes of Western Pacific and EqualNet, for the purposes of this litigation, as members of the potential class. By virtue of the assignments, they possess the same interest as Western Pacific and EqualNet and thus may continue to assert a claim for the same injury shared by all members of the class. The district court order was vacated and remanded to the district court for further proceedings.

Forecasting Natural Gas Liquids Prices

As part of her MBA coursework at UT, Courtney Bragg recently completed a group project that studied the relevant markets and identified the factors determining the prices of ethane, propane, butanes and natural gasoline. Courtney and her group developed remarkably accurate forecasts of these NGL prices that were praised by the industry experts to whom the results were presented. The graph below is an example of the analysis prepared.

While the primary methodology was multivariate regression of variables analyzed and identified as being most correlated to the price of a particular NGL, Courtney's group also developed "bottom up” supply and demand graphs to estimate price equilibrium.

We congratulate Courtney on her group's success.

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