Electronic discovery Featured

8:00pm EDT July 26, 2007

No company is immune to the possibility of litigation. In the case that a claim arises, having policies concerning the retention and destruction of electronic data can take some of the hassle out of an arduous and expensive process.

“Businesses should understand now what their information technology (IT) systems are, how they work and what policies and procedures they may want to adopt with an eye toward the potential for litigation,” says Mark Goldner, associate at Jackson Lewis.

Smart Business spoke to Goldner about the new rules concerning electronic data and discovery.

What’s new pertaining to rules of discovery?

The federal rules of civil procedure pertaining to discovery were recently amended to more explicitly account for electronic data. E-mail would be the first type of electronic data that would come to people’s minds, but it could be spread sheets, presentations, financial information, or anything that is in electronic form.

A party in litigation has an obligation to preserve information that may be relevant to the claims or defenses as soon as it has reasonable notice of a possible claim. That obligation had always applied by implication to electronic data. The rule amendments, however, more explicitly deal with how the parties should fulfill the obligation in connection with electronic data.

This litigation obligation implicates what employers should be doing before a claim is made. In other words, employers should consider how they are collecting, retaining and destroying electronic data now.

What happens if a claim arises tomorrow?

If an employer is involved in a discrimination claim, the plaintiff has to go to a federal or state agency and file an administrative charge of discrimination as a precursor before he or she can actually sue in court. Because it’s an administrative charge and not a lawsuit, some employers may not consider their obligations in litigation. However, a defendant’s obligation to preserve evidence, including electronic data, starts at the notice of the administrative charge, which could literally be two or three years before the employer is sued in court. So at the notice of an administrative charge, a company really should take steps to identify and preserve any electronic data residing in any of its systems.

How should data be managed?

There’s no magic list of particular protocols — but companies should have policies in place to understand how data is collected, retained and lost. For example, the company could have an explicit destruction protocol where it makes backup tapes every 30 days, saves them for a year and then destroys them. Or it may have a system where data is periodically overwritten.

The company’s IT department should be integrated into the management team, particularly when there’s a claim against the company. In litigation, you really rely on the IT guys to explain what the systems are and how they work and to help the human resources and legal folks come to terms with how the company fulfills its obligation to preserve electronic data.

What are some common challenges involved in electronic discovery?

One challenge of electronic discovery is the cost. The cost of production to the opposing party, which may entail figuring out what you’ve got, finding it and producing it, can be very onerous and include thousands of pages of documents. The other enhanced cost comes from discovery disputes. Disputes over electronic discovery can be time consuming, expensive and contentious. Imagine a company’s reaction to a plaintiff’s lawyer being allowed to root around the company’s electronic databases. Having good IT policies and procedures that are actually followed places a company in a better position to meet its obligations in the most cost efficient manner.

What might be a common dispute?

The new rules have an explicit safe harbor such that a party cannot be penalized for the loss of data due to the good faith running of its policies and protocols. Say all the emails on a company’s server are destroyed every 31st day and the company is put on notice of a claim on the 25th day of the 31-day cycle. Let’s say that because of reasonable notification procedures, it doesn’t stop its destruction protocol and loses all of those emails for that 31-day cycle. But, it suspends its destruction protocols and preserves emails in the next and subsequent cycles. If the company acted reasonably and the emails were lost due to a policy or procedure, it shouldn’t be penalized for the loss of that data.

On the other hand, if the company is put on notice of the claim and doesn’t do anything for six or eight months, then it probably hasn’t acted reasonably and is subject to what’s called a spoliation charge. If it’s found to have engaged in spoliation — whether through negligence or through purposeful conduct — a company can be subject to rather severe sanctions.

What should employees know about their company’s policies?

Employees have to know the company’s policies and understand what ‘deleted’ really means — in general and on the company’s system. Even when deleted, e-mails often may be forensically recovered from a computer hard drive. And because ‘deleted’ e-mail may be revealed in discovery, employees should send every message as if someone is looking over their shoulder.

MARK GOLDNER is an associate at Jackson Lewis. Reach him at (412) 232-0404 or goldnerm@jacksonlewis.com.