Managing Electronic Discovery
New rules from the federal courts mean companies and individuals must be prepared to turn over electronic information during the discovery phase of litigation.
By Peter Berger -- JCK Online, 5/1/2008 2:00:00 AM
In the past, when discovery materials were produced during litigation, data were generally memorialized on paper, and that's how discovery materials were produced. But newly enacted rules regarding litigation in federal court focus on the discovery of electronically stored data, such as e-mails. Federal courts are now requiring electronically stored data to be turned over to the other parties during litigation. State courts will likely follow suit.
That means you may have to turn over different kinds of electronic data to other parties during the discovery stages. The new discovery rules require the production of electronically stored data in the form of, but not limited to, writing, drawing, charts, images, photos, sound recordings, voice mails, e-mails, instant messages, metadata, text messages, cell phone data, cell phone text messages, and any other forms of electronic data or data compilation. The scope of electronic discovery can be broadened to include electronic data stored on people's personal computers and other forms of electronic data including e-mails from people's personal e-mail accounts if they are related to the litigation matter.
Many businesses and people, especially small businesses, complain that this is a new area for them, and that it imposes unreasonable financial burdens. Courts have acknowledged their arguments but generally are not sympathetic to them, especially if a party in the action has not taken steps to manage its electronic data.
Here are some suggestions:
Everyone should have a decent electronic data preservation policy. That's basically a plan that provides details regarding how, where, and for how long electronic data are stored, and identifies the person(s) responsible for managing the electronic data. It can contain several components such as a data retention policy, a litigation hold procedure, and a preservation order, which is basically a letter that management sends to its employees and divisions informing them that litigation is imminent and to pay special attention to all documents and electronically stored data.
A good data retention policy ensures that all needed business records in the form of document and electronic data are kept in a proper manner. For instance, in certain industries companies (such as SEC-regulated entities) are legally required to hold on to certain types of documents. Another aspect of an effective data retention policy is to provide details as to how and where electronic data are stored and for how long different types of electronic data are being stored. Details should provide a list of the types of servers and backup tapes being used to store data and identify documents by different subject areas. The company must know where its documents and electronic data are kept and how the information is retained. The data retention policy should provide a road map that enables others to locate a specific document. It is extremely important to have an electronic data retention policy that is actively enforced and audited.
Because this area is new, it's not known how long electronic data should be kept. Past case law appeared to require keeping everything for a long period of time. Recently, courts have loosened these requirements to not require companies to keep every scrap of paper, every e-mail and electronic document, and every backup tape. Hence, companies only need to keep electronic data as long as necessary for business purposes. If an electronic data policy requires the company to retain documents and electronic data for two years, then there should be two years only of stored data and documents to be searched.
Nevertheless, courts will look at your electronic data retention policy and assess if it's reasonable. Rule 37(f) in relevant part states that "a court may not impose sanctions ... on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system." Even though many computer programs are not made to store information for a long period of time, computer systems provide users or administrators options as to time periods and volume thresholds in which data are deleted, overwritten, or stored to off-line locations. Hence, it's most important to have a reasonable but active data retention policy so a court can be persuaded that missing data were deleted pursuant to a sound plan and not willfully destroyed.
The second component is to have a litigation hold procedure. Once litigation and/or government investigation is reasonably anticipated, a company should institute a litigation hold to make sure that potentially necessary documents are not destroyed. Courts are now watching companies that are involved in lawsuits to see if they institute litigation hold procedures. The hold policy should play a big role in the overall preservation plan so that the company does not accidentally destroy data and face serious sanctions. A good hold policy should provide details as to when and how to activate and ensure compliance with the litigation hold policy.
The third component is to have an effective preservation order, which is a letter that management sends to its employees and divisions informing them that litigation is imminent and telling them to pay special attention to all documents and electronically stored data. If management believes litigation is oncoming, they should send a clear and detailed letter to relevant employees and relevant divisions alerting them to the situation and requiring the hold to take effect. Courts recently have issued opinions requiring companies to send out litigation hold letters to employees and divisions.
Finally, the fourth component should provide the names of individuals involved in the management of electronic data. For several reasons, it might be beneficial to appoint an individual to coordinate and manage the whole electronic data storage process and have a description of the process by which electronic data are handled. First, it minimizes confusion and stress on the part of the company if such a person knows and documents how different kinds of electronic data are stored, maintained, deleted, or disposed of. This person should know where and how all data—both paper and electronic—are being used. He or she should know how information is backed up, where data are stored, and the type of information stored on various servers or networks. The preservation plan should consist of a memorandum that identifies the coordinator and provides a general description of the policy. It also should identify who is responsible for the preservation of what data.
A company should be careful about disposing of data that might be helpful for itself or its clients for future litigation or business purposes. If a company gets rid of electronic data that are not helpful to itself but saves other data that are helpful for itself or its clients, courts may construe that to mean the company is trying to get rid of damaging materials while keeping good materials. That company may face serious sanctions, including but not limited to criminal sanctions.
Some might argue that it does not make sense to issue a litigation hold letter ahead of time if litigation is potentially imminent. On the other hand, moving ahead of time might save the company money and provide additional time to ensure that the preservation plans are in place. From the practical standpoint, companies that implement new policies on controlling the flow of electronically stored data can save themselves a lot of money and headaches. For instance, if litigation was started, and a company does not have a retention policy and a system in place, there may be a lot of pressure and stress on the business involved in litigation to gather all of the relevant electronically stored information and data. That business may spend a lot of money quickly merely to determine how electronically saved data are stored. In addition, companies that have a system set up to retain electronically stored data are generally less likely to neglect to produce discoverable data. Essentially, this means that if a judge finds out that a company neglected to produce discoverable data, the judge can sanction the company. In addition, the sooner the hold is in place, the less likely it is for the company to accidentally destroy documents and electronic data. This process makes life easier for everyone during the later stages of litigation.
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