CORPORATE "E-DISCOVERY” – A PRIORITY NOW OR A RISK LATER

By: W. Corey Grimley

Business owners and managers who have had their companies involved in lawsuits know that "the discovery process” is probably the most frustrating and expensive part of the experience. The attorneys for both sides send extensive written discovery requests to one another asking for voluminous copies and pictures of everything but the kitchen sink (and in construction litigation, sometimes the sink too … ).

All steps of the discovery process, on both sides of the case, are invariably and unfortunately very costly in terms of time and money to the clients. In response to "Requests for Production” and court subpoenas, boxes and boxes of files must be retrieved from files rooms, attics, and remote storage. These boxes must then be manually reviewed to determine what documents must be produced in response to what request from the opposing attorney. There was once a time when we only had to worry about the paper.

Now, to add insult to injury, we may have to also be able to put our fingers on all of the company email (wherever it is located) and other electronically stored information, and do the same sorting. Where are those "electronic” documents stored? Are they only attached to emails? Are they on individual employee "flash drives” on their key chains? Were they backed up on the server? If we are not sure, will the judge make me produce my home computer if I used it and my personal email address for business purposes?! These only touch on some of the issues addressed by "e-discovery” in litigation.

Currently, in the business world, over ninety percent of all information is created in electronic format. Shortly after electronically stored information became commonplace in the business world, the state and federal courts began to see more and more requests and subpoenas between adversaries in lawsuits demanding one another’s electronically stored information.

Many businesses know (or hopefully have a good idea) where all their paper documents are located concerning a specific account, transaction, etc. But if the business is served with a subpoena ordering the production of all "electronically stored information” on a specific matter, including email, within fifteen to twenty days, can the business comply? For an account that dates back five or ten years? How have those documents been saved and/or archived? Have they been saved separately from other files on different matters? Can all emails addressing the issue in any manner be easily gathered and produced?

If the answer to these types of questions is "No,” then the business is probably not prepared to respond to such a subpoena quickly, confidently and inexpensively (or at least less-expensively). The business is therefore at risk. The business will then invariably be forced to hire an expensive, third-party, information technology ("IT”) vendor to comb through possibly years of electronic documents and emails in the hopes of isolating information responsive to the subpoena or discovery requests. What must be done in haste may be much more expensive than what is done without an immediate, court-ordered deadline.

The nightmare does not end with the expense of data retrieval. Federal courts are now regularly sanctioning and fining parties to lawsuits for failing to take the necessary steps to protect the data which is responsive to the discovery requests and subpoenas. In other words, "we don’t have it anymore” does not necessarily get the business out of the woods.

Federal courts have held that "the obligation to preserve evidence arises when the party has notice that the evidence is relevant to the litigation or when a party should have known that the evidence may be relevant to future litigation [emphasis added].” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003). So parties to a not-yet-filed lawsuit have to be sure that they are retaining discoverable documents potentially years before the lawsuit is eventually filed, simply because they arguably "should have known” the evidence may be relevant to the future litigation. To be sure, the opposing attorney will certainly be arguing that the party "should have known” that the documents needed to be retained.

Even if the business deletes/destroys documents consistent with a properly implemented "document retention policy,” the business could be in trouble with the court. If that deletion/destruction occurs after the business "should have known” the evidence "may be relevant to future litigation,” the business may very well be subject to sanctions by the court once the lawsuit gets underway for breaching the business’s obligation to preserve evidence.

What can you do now to better protect your company against prohibitively expensive, post-lawsuit, IT costs and possibly severe discovery sanctions by the courts? A start is to consult with your legal counsel about how your business can develop an economical approach to complying with the federal rules on e-discovery, to be prepared for a possible suit and the related discovery requests. This consultation will probably also involve the use of a third-party IT vendor (if your business has no competent in-house IT employee). Most IT vendors will explain that the costs of devising an appropriate document retention and archival system, prior to the pressures of litigation, that will be a fraction of the cost of addressing the problem in the face of a pressing federal court order.