Form Follows Function: Negotiating the Second Request Process with Government Regulators

This temptation, however, must be resisted until some key “gating factors” are negotiated with the government. Otherwise, legal teams may go down a wrong path with the Second Request review and end up wasting money. These gating factors control what needs to be reviewed, how and when, all of which must be agreed upon before review—either electronic or eyes-on—can begin in earnest.

Having managed the e-discovery process for dozens of Second Requests in the past several years, our team has developed a playbook for the best strategies, technology and workflow to cost-effectively manage a Second Request. This paper outlines one part of the playbook, how to negotiate with the government at the outset on timing agreements, custodian scope, Technology Assisted Review (TAR) and government oversight and reporting. In our experience, the seeds of success are often planted during the government negotiations at the outset of a Second Request.

Timing Agreements

First, a quick refresher on the process. Two companies announce a merger or an acquisition, and the Federal Trade Commission (FTC) and/or the Department of Justice (DOJ) have 30 days to conduct an initial review of the deal. These agencies want to ensure that this proposed action will not cause harm to consumers. If after the initial review the agencies need more information before making a ruling, either agency may issue a "Second Request" for more data. For the companies involved, the goal of the Second Request is to certify compliance with the request, which then triggers a 30-day period in which the government must "complete its review of the transaction and take action if necessary."

The above outlines the fixed and codified process, but what’s negotiable? The actual date for compliance is usually negotiated between the government and companies, as are the conditions for compliance. So, upon receiving the Second Request, the legal teams from both companies will need to quickly figure out what the government will want to review, assess how long it will take for the companies to collect, review and produce the relevant materials and privilege log to the agency, and then try to negotiate a deadline that works within those constraints.

It’s important to understand the underlying tension point at the heart of negotiating the compliance certification deadline and productions. Usually, the government wants as much time as possible to review the data – emails, spreadsheets, voicemail recordings, chats, etc. – and determine whether proposed merger will create an unfair market advantage for the new entity. Thirty days is often not enough time to fully review the materials, so the last thing that the government wants is to receive all documents on the same day, right before the negotiated certification compliance deadline.

On the other side, the merging companies typically want to complete the e-discovery process and certify compliance as quickly as possible. After all, board members, executives, stockholders and employees are all in limbo during a Second Request, waiting for the process to finish to fully gauge how the merger will impact them.

Given these various concerns, legal teams should do a few key things before meeting with the agency staff to discuss the timing agreement. First, as much as possible, scope out the likely custodians and the amount of data that will need to be collected. Consider whether the data resides outside of the United States and may be subject to data privacy laws or contain other languages, requiring extra steps and time for defensibly transferring to the US. Assess whether relevant data resides in a unique or new digital format, such as a cloud-based collaboration application. And, as much as possible, tier the custodians so that the team has a clear understanding of the priority materials. For example, high priority custodians may include c-suite executives and those directly involved in the merger.

Once the data universe is defined, the legal team needs to assess realistic timeframes for the e-discovery process given the budget and staffing levels for legal review attorneys. If the legal team knows that executive leadership wants to reach compliance and close the deal within a certain timeframe, they may have to do some internal negotiations to ensure that they have the right team in place to hit those deadlines.Assuming the legal team has followed these steps, they should walk into negotiations with a good sense of the amount of data at hand, the various tiers of data that may be responsive, and realistic timeframes for them to produce this data to the government.

Even with a perfect plan, there are often unanticipated complications, such as later finding that a custodian did not fill their role for the entire time and additional predecessor data exists, or an unusually large or complicated privilege log. Fortunately, an experienced Second Request team knows... download the full white paper below to continue reading.