The Implications of a Jeopardy! Computer Named Watson: Beating Corporate Boards of Directors at Fiduciary Duties?

• Publication year: 2022
• Citation: Vol. 45

45 Creighton L. Rev. 377. THE IMPLICATIONS OF A JEOPARDY! COMPUTER NAMED WATSON: BEATING CORPORATE BOARDS OF DIRECTORS AT FIDUCIARY DUTIES?

THE IMPLICATIONS OF A JEOPARDY! COMPUTER NAMED WATSON: BEATING CORPORATE BOARDS OF DIRECTORS AT FIDUCIARY DUTIES?

Roger M. Groves(fn*)

I. INTRODUCTION...................................378

II. ELECTRONICALLY STORED INFORMATION IN LITIGATION.......................................379

A. The Scope of the E-Discovery Problem and Underpinnings for Forensic Analytics............380

B. Platforms.......................................382

C. Enronic Embryonics of Forensic Analytics........383

D. State of the Science.............................385

E. Predictive Analytics .............................387

F. E-mail Analytics................................391

G. Contextual Forensic Evidence in Litigation ......392

III. ISSUES OF PROCEDURE AND ADMISSIBILITY: LITIGATION HOLD AND SEARCH PROTOCOL ....394

IV. SUBSTANTIVE CLAIMS AGAINST DIRECTORS FOR BREACHES OF FIDUCIARY DUTIES.........399

A. Plaintiffs' Quiver of Claims-A Wide Array of Theories and Causes of Action ...................399

B. The Defendants .................................403

C. Defining the "Duty" in the Digital World.........404

D. Data Recovery and Analysis .....................405

E. The Preeminent Importance of Metadata and Unveiling Attempts to Destroy Evidence .........407

F. Correlating Forensic Analytics with Fiduciary Duty Claims ....................................410

G. Forensic Behavioral Analytics...................413

H. Securities Claims................................417

I. The Danger of Adverse Inferences ...............418

J. Maximum Director Protections ..................420

K. Financial Reporting Enhancements..............422

L. The Impact of Social Media......................423

V. CONCLUSION .....................................424

Computers are getting better at mimicking human reasoning-as viewers of 'Jeopardy!' found out when they saw Watson beat its human opponents . . . [This] software provides a way to better understand the internal workings of corporations he sues, particularly when the real decision makers may be hidden from view. Now artificial intelligence software has taken a seat at the negotiating table.(fn1)

I. INTRODUCTION

Can my employer look at my e-mails, cell phone calls, instant messages, Facebook, and Twitter accounts over the past two years and know when I lied? Can they know when I edited documents uncharacteristically as part of a cover up? If I am on the board of directors of a corporation, can my e-mails reveal our decision-making anomalies? If so, how does that play out in litigation? Ask Enron executives. Welcome to the world of forensic evidence analytics.(fn2)

While the story of Enron has largely been written, the Enron litigation documents are unwitting sunken treasures that are still being explored. Millions of documents, including five million messages, termed electronically stored information ("ESI, from the Enron litigation have provided an opportunity for software developers to commence a cottage industry.(fn3) The industry is forensic examination of ESI to discover trends and make findings as to who did what in the company. The industry of forensic analytics found its oasis in those Enron documents, now known as the "Enron Corpus." Pretrial discovery is now thrust onto a technological landscape the law is struggling to traverse. The struggle is due in large part to the volume of ESI and the value of cutting edge software that analyzes documents for behaviors of computer users in more provocative and innovative ways than previously encountered.

The e-discovery ambiguities and uncertainties provide an opportunity for counsel to manipulate or take advantage of forensic investigations. This Article examines the potential exploitation of e-discovery forensic tools by a corporation's shareholders who suspect their board members have breached their fiduciary duties. Accordingly, Part One highlights the background and evolution of e-discovery. Part Two presents a more detailed discussion of specific types of forensic evidence as applied to litigation, and potentially, fiduciary duty claims. Finally, Part Three applies the various forms of forensic analytics to shareholders' breach of fiduciary duty claims.

II. ELECTRONICALLY STORED INFORMATION IN LITIGATION

The tremendous growth in the costs to produce volumes of electronically stored information ("ESI as part of pretrial discovery is well documented.(fn4) The failure of business organizations to preserve ESI, the failure to develop new skills to preserve ESI, and counsel attempts to abuse the discovery process to prevent collection or create unreasonable demands for the information have all led to confusion and judicial sanctions.(fn5) As stated by one group of experienced e-dis-covery litigators, "The resources of clients, counsel and courts are quickly overtaxed in this new era when counsel make unreasonable demands for information or fail to carefully think through the process of searching for and colleting ESI."(fn6)

In response to this techno-legal morass, the Federal Rules of Civil Procedure ("FRCP were amended to specifically guide attorneys concerning their duties in requesting and responding to discovery.(fn7) Not surprisingly, the FRCP could not cure all the potential ambiguities and crafty tactics in litigation, so numerous federal court decisions attempt to clarify these e-discovery issues.(fn8) Some cases provide sanctions for discovery improprieties, some do not, and others select or threaten an array of other remedies for e-discovery violations.(fn9)

A. The Scope of the E-Discovery Problem and Underpinnings for Forensic Analytics

The Advisory Committee ("Committee tasked with amending the Federal Rules of Civil Procedure to address e-discovery issues identified four major reasons why amendments were necessary.(fn10) All of those reasons provide background for why forensic analytics is relevant. These reasons link forensic evidence with the potential for increasing the risk of fiduciary liability for corporate board members.

The first reason for the e-discovery amendments is that the sheer volume of electronically stored information ("ESI dwarfs any traditional concept of scope known in the primarily paper record era. According to the Committee's findings, "[N]inety-five percent of all information is now generated in digital form, [and] all document discovery is or will soon be e-discovery."(fn11) A major corporation may easily have 10,000 tapes of information.(fn12) Just one tape is the equivalent of a "200-mile high stack of paper".(fn13)

The second impetus for e-discovery rules is the "dynamic nature" of ESI, since it continues to grow and evolve.(fn14) Eerily similar to fictional horror films of man versus machines, computers automatically create and store information without human operator advice or knowledge.(fn15) Importantly, a corporate director from the typewriter era may not know that the modern computer has "metadata," which can identify information about the user well beyond the words typed into that computer. Metadata can identify the creator and when the information was last accessed and last edited.(fn16)

Saliently for this paper, metadata also includes "clues to human behavior."(fn17) As artfully stated by one author, "[Metadata is] . . . the electronic equivalent of DNA, ballistics and fingerprint evidence, with a comparable power to exonerate and incriminate. Metadata sheds light on the context, authenticity, reliability and dissemination of electronic evidence . . . ."(fn18) The utility of this metadata, particularly its potential to "exonerate and incriminate," is brought to fruition through the forensic analytics discussed in this Article. The subject to be exonerated or incriminated can be a corporate director. Accordingly, metadata is a vital aspect of forensic analytics and will be discussed in greater detail below.

The third reason for e-discovery amendments is simply because unlike paper records, electronic records are practically impossible to delete.(fn19) A corporate employee who hits the delete key only moves the data to a more remote location.(fn20) Though more expensive or time consuming to obtain, the data is not only recoverable but also discovera-ble.(fn21) A corporate officer or board member, therefore, may have deleted an item that nonetheless can be part of forensic analytics, the very process that may lead to incriminating inferences or conclusions regarding that person.

The fourth unique challenge brought by ESI is the added complexity required to process document retrieval, restoration, and trans-lation.(fn22) In an age of accelerated technological advances, it is entirely possible that ESI was initially stored in devices that are now obsolete or part of an inaccessible or poorly organized prior format.(fn23) Translating information to current formats may be costly and time consum-ing.(fn24) These retrieval burdens add to the burden of being a director defendant who is obligated to produce ESi from obsolete storage devices.

For defendant directors, the retrieval and translation problems may be compounded by the possibility of multiple plaintiffs. in this Article, shareholders are contemplated as plaintiffs, but a director's fiduciary duties run to both the shareholders...