The new Federal Rules of Civil Procedure concerning electronic discovery have dramatically changed the way some lawyers and their clients litigate disputes. Companies are frequently finding themselves embroiled in heated discovery battles for electronically stored information (“ESI”), and occasionally sanctioned for their failure to preserve relevant electronic evidence. Against this legal landscape, it is important to understand some of the unique challenges posed by ESI, and the proactive steps companies can take to win the “battle for bytes” – before it even begins.
UNIQUE CHALLENGES OF ESI
Businesses run on information, and the overwhelming majority of that information is stored electronically. A recent management study revealed that more than 93% of all commercial documents are stored electronically, and have no paper counterpart. Despite its prevalence (or, perhaps, because it is so prevalent) ESI poses unique problems for companies. By its very nature, ESI is constantly changing. Unlike a paper document, electronic files are not static. For example, each time a file is opened or saved, the “metadata” (background information concerning the location, author, creation date, etc.) surrounding the file necessarily changes. Deleted files are not really “deleted” at all, but can be accessed through the use of a forensic expert. At the same time, computer viruses and even system upgrades have the potential to corrupt and destroy ESI.
From a litigation standpoint, perhaps the most challenging aspect of ESI is its sheer volume. A company with 50 employees typically generates more than 300,000 e-mails a year, many with attachments. A draft document circulated to employees for review and comments can generate dozens of different versions of the same document. A single CD can hold the equivalent of 325,000 pages of text. All of this information is potentially discoverable, and the massive volume of it all renders it cost-prohibitive – if not impossible – to review, analyze and produce it in the course of litigation.
WHY PARTIES BATTLE
The concept of “metadata,” as well as the notion that deleted files can be retrieved, creates an incentive for litigants to engage in discovery in the broadest possible scale. It also increases the parties’ appetite and incentive for “scorched earth” discovery – where a party uses discovery requests not only to obtain information, but also to overwhelm and overburden its adversary. This tactic is often designed to turn the tide in “David vs. Goliath” litigation, where a single individual (such as a plaintiff in an employment dispute) possesses virtually no ESI, but can force a much larger opponent to incur substantial costs responding to burdensome discovery requests.
In addition to the costs associated with producing ESI, companies need to be very concerned about the costs associated with not producing ESI. Courts have adopted “zero tolerance” policies, and routinely issue sanctions for the failure to preserve and produce ESI. These sanctions range from attorneys’ fees, to fines (anywhere from tens of thousands to millions of dollars), to default judgments. It is increasingly common that lawsuits are determined not by their merits, but by a party’s failure to preserve electronic evidence. Companies are placed in a difficult position, seemingly forced to choose between two competing operational choices: “keep everything,” or “delete as much as possible.”
If a company is concerned about being sanctioned for failing to preserve evidence, it may be tempted to adopt the “keep everything” approach. However, the more information a company keeps, the more it will need to review and analyze, and the greater its e-discovery compliance costs will be (tempting a company to reduce costs by deleting as much ESI as possible). The practical solution is for companies to periodically evaluate their ESI, and to keep only what is truly necessary. In making that determination, the company must evaluate three categories of need:
Business need: Information the company requires to conduct its business. For example, employees in one division may typically need to refer to e-mail messages for a six-month period, while employees in other divisions may need access to e-mail messages for a much longer (or shorter) period.
Statutory need: Information that the company is legally required to maintain for a specific period of time, as defined by statute or regulation.
Litigation need: Once the company reasonably anticipates that litigation (or, a regulatory investigation or audit) may be forthcoming, it has an affirmative duty to protect and preserve all relevant documents and information – including ESI.
Thus, the “Battle for Bytes” is really about cost. It is a war of attrition between litigants, with an everlooming threat of court sanctions.
WIN THE BATTLE – BEFORE IT EVEN BEGINS
The best way to win an e-discovery battle is to avoid it in the first place by thoughtfully and proactively managing your ESI. The following five steps provide a basic roadmap that companies can follow to best prepare themselves for almost any e-discovery request.
Step 1:Map it Out. Create an “ESI Map” to understand your company’s data architecture. What systems and software does the company use? What types of documents and information does the company save? How is the information saved? Where is it saved (e.g., on central servers, employee desktops or laptops, etc.)? What is the company’s current and projected volume of ESI? How does the company manage its back-up and disaster-recovery tapes? Are there any legacy systems that can no longer be accessed with current technology? There is no substitute for preparation; creating a comprehensive ESI Map will allow you to identify relevant data repositories, and ensure that key documents are quickly preserved, reviewed and produced.
Step 2:Prepare Policies and Procedures. Create workplace policies to control and manage your ESI. Computer usage policies should address where employees are allowed to store company information. Document retention and destruction practices should be formalized, and information should only be destroyed according to the methods and schedules set forth in the policy. Before creating workplace policies, however, spend time evaluating your employees’ practices and habits. Do employees use flash drives to save and transport company information to other computers? Do they e-mail company documents to their home-based internet accounts (e.g., “AOL” or “Yahoo”) in order to work after hours? Do they routinely store information on the hard drives at their work stations? Policies are only effective to the extent that employees actually follow them, and an ESI policy that inconveniences or frustrates employees is not likely to be followed.
Step 3:Educate your Workforce. There is little point in having a policy if employees don’t know what it is. Take steps to make sure your employees clearly understand the company’s ESI management policies, and why they are important. The policies should be part of your employee handbook, and employees should receive “refresher training” on the topic at least annually. The goal is to create a “culture of compliance” among your workforce.
Step 4:Create a Litigation Hold Committee. Companies should create a standing “litigation hold committee,” whose purpose is to evaluate litigation risks and timely implement appropriate steps to locate, protect and preserve relevant ESI. The committee should be populated by representatives from the company’s key departments, including human resources, information technology, and legal, and should contain at least one senior C-level executive (this will ensure that the committee’s directives are followed). The committee should meet regularly, and be available on an ad hoc basis to discuss particular cases as they arise.
Step 5:Initiate the Hold. Once the company reasonably suspects that litigation (or a regulatory investigation or audit) may be forthcoming, the litigation hold committee should immediately issue a litigation hold to all employees who may have relevant information or data. Consider hiring an independent expert to create a forensic image of the hard drive for each “key player” involved in the underlying conduct, to ensure that all relevant ESI is preserved. If an employee leaves under questionable circumstances, consider simply removing the hard drive from his or her computer and preserving it. In addition to implementing the litigation hold, the committee will also need to monitor employees’ compliance with the hold, and to periodically refresh the hold. The duty to preserve documents and ESI continues on a going forward basis until the litigation hold is released (typically, when the underlying dispute has been resolved).
Navigating the e-discovery process can be very risky business, but it does not have to be. By proactively managing their ESI, companies can minimize, and even eliminate, a substantial number of the risks and costs associated with commercial litigation. For additional information regarding electronic document management and best practices, please contact Christopher Griesmeyer at Greiman, Rome & Griesmeyer, P.C. (firstname.lastname@example.org)