New e-discovery rules Featured

7:00pm EDT January 31, 2007

Recent amendments to federal court rules will impact how businesses handle electronically stored information, which includes e-mail and other documents that reside on corporate computers and servers. The new rules are designed to put electronically stored information (ESI) on the same legal footing as traditional paper documents.

“The rules apply to every company that may become involved in litigation — essentially, any company that transacts business,” says Chris Griesmeyer, a partner at Levenfeld Pearlstein LLC. “However, mid-sized companies are likely to find compliance with the new rules particularly troublesome and should take steps to manage their ESI before a lawsuit even begins.”

Smart Business asked Griesmeyer to discuss the new rules and how company officers should react to them.

What kind of burdens are imposed by a request to produce electronically-stored information during a lawsuit?

The problem is one of volume. A company with just 50 employees can generate more than 300,000 e-mail messages a year. Consequently, electronic information is often measured in ‘terabytes,’ which is the equivalent of 500 million typewritten pages. A company asked to print or photocopy a single terabyte of information would need more than 1,000 pick-up trucks to haul it.

Moreover, because electronic information is extremely cheap to store, companies tend to stockpile mass quantities of outdated information. Because of this volume and because highly trained forensic experts are needed to manage the e-discovery process, it is not unreasonable for a company to spend hundreds of thousands of dollars simply navigating the pre-trial discovery process.

Is there any way to mitigate the financial burdens imposed by e-discovery?

The new rules allow a party to object to an e-discovery request because obtaining the information would be unduly burdensome or cost-prohibitive. However, if you object to an e-discovery request, be prepared to produce your chief technology officer and IT consultants for their depositions. And if their deposition testimony fails to prove that the burden or expense is sufficiently ‘undue,’ then be prepared to produce the information.

At the same time, a court has the power to limit discovery if there is a way to obtain the electronic information that is more convenient, less burdensome or less expensive. The new rules encourage parties and the court to discuss these issues before a trial begins.

What do the new rules say about privileged documents in the e-discovery context?

If a party produces a document that is protected under the attorney-client privilege or the attorney-work product doctrine, then the protection is typically waived and the document becomes fair game. But if a privileged document is inadvertently produced, the new rules provide an automatic ‘claw-back’ mechanism. If a party accidentally produces a privileged document and notifies the recipient, the document must then be returned, sequestered or destroyed until the court resolves the issue of privilege. The same claw-back mechanism is also available to nonlitigants responding to a subpoena.

The new rules also say courts may not impose sanctions on a party for failing to produce ESI that was lost as a result of the ‘routine, good-faith operation’ of a computer system. The catch is that you cannot exploit the routine operation of a computer system in order to thwart your discovery obligations.

In light of these new rules, what steps do you recommend corporate officers to take?

First, companies should establish formal policies to routinely purge and destroy ESI that is no longer needed. Any retention and destruction policy should be individually tailored to balance operational requirements, IT infrastructure, regulatory and compliance responsibilities, and litigation requirements.

Second, make sure your employees understand and adhere to the policy. There is a famous case in which the company’s policy was to recycle backup tapes every 45 days. If the company had simply followed its own policy, there never would have been a discovery dispute. But, for whatever reason, its employees failed to recycle the tapes. As a result, the company was asked to produce 93 backup tapes, which would take six months to review and produce at an estimated cost of $6.2 million. That’s an expensive lesson.

Finally, once you become involved in litigation, it’s really important to retain experts to make sure you’re getting complete electronic information from the other side, as well as managing your own ESI production. Even the best lawyer is not as good as a forensic expert when it comes to obtaining, analyzing and reconstructing electronically stored information. The forensic consultant will know how to identify deleted documents, missing e-mail messages and crucial metadata.

CHRIS GRIESMEYER is a partner and vice chair of the Litigation Practice Group at Levenfeld Pearlstein LLC. Reach him at (312) 476-7574 or cgriesmeyer@lplegal.com.