In 2005, a court-ordered statement of facts, attributable in part to the spoliation of electronic information, led to a $1.45 billon jury award against Morgan Stanley & Co. This case is one of many confirming that courts are not willing to relax discovery requirements or overlook discovery abuse because data is maintained electronically. Today, the majority of commercial data and corporate communications are either stored or transmitted electronically consequently requests for electronic information (“e-discovery”) are common in business litigation.
Frequently in litigation, the opposing side may send a “preservation” which demands that you preserve all electronic data. This letter typically demands the sequestration of a business’s computer network and all employee computers pending the final resolution of either anticipated or currently pending litigation. The tactic positions your opponent to seek a spoliation instruction and/or other sanctions for non-compliance. However, the lesson learned from such missives is that reasonable preparation long before litigation is even a glimmer in a potential plaintiff’s eye can result in cost savings in responding to an e-discovery.
Gain Control of the Information
A prudent business needs a written document management policy (“DMP”) in place that applies to both paper and electronic information while serving the business needs of the organization and meeting any regulatory and tax requirements. Strictly following the policy should position the business to argue credibly that the prior elimination of information was in compliance with a reasonable document disposal plan that served legitimate business needs. The DMP should:
- Preserve business records during their useful life.
- Provide a legitimate explanation as to why certain documents may no longer exist.
- Include a litigation hold procedure to preserve documents (including electronic information) that might be related to ongoing or reasonably anticipated litigation as well as government investigations or financial audits. Company personnel must be sensitized to the importance of legal holds and educated to realize that drafts of company documents and emails on their portable storage media are company property for purposes of responding to e-discovery requests.
A DMP should also identify, limit, and control the number of “cubbyholes” in which employees might squirrel digital information by including:
- A policy regarding the use of portable storage media to conduct company business;
- And a company policy regarding the use of “other computers” to conduct company business (i.e., employee’s personally owned computers).
A policy that achieves these goals should make preparing the e-discovery response more efficient and economical.
Developing a Response Plan
Concurrently with implementing a DMP and procedures, a multi-step response plan should be developed to handle an e-discovery request. The planned steps should include:
Step 1. Identify current and former employees as well as divisions or groups within the company that may have information relating to the dispute.
Step 2. Issue an appropriate hold order to those identified employees and groups within the company, instructing them to retain all documents (including electronic information) and not to delete any information from any media. Data attributable to former employees should also be reviewed for potentially relevant documents.
Step 3. Interview the identified key people and departments to ascertain how they generate and manage documents and electronic information relating to the disputed issues. The process should identify all of the relevant information retained on all available media sources. This assessment of the scope of electronic material can then precipitate a decision as to how best to preserve the information and whether any back-up or disaster recovery systems need to be preserved.
Step 4. At a minimum, all currently existing files identified as potentially relevant should be segregated to a separate server or database that cannot be compromised. Use competent personnel (or outside experts to help avoid the possible waiver of legal privileges) so that any related metadata is not lost or compromised in the process. If an individual played a pivotal role in the issues underlying the litigation, determine if his computer should be forensically imaged. Consideration should also be given to using software programs that perform keyword searches on computers and servers.
Good Communications Save Time and Money
Once a lawsuit has been filed, it is highly recommended (and required by several U. S. district courts) that the parties confer regarding the handling of electronic discovery. Such a conference, early in the process, affords the parties the opportunity to agree on the type of electronic information that needs to be preserved, thereby potentially minimizing the collection effort and avoiding future discovery disputes over the spoliation of evidence.
Careful planning coupled with a thorough effort to identify and preserve potentially relevant information should position the company to demonstrate it has taken the proper steps to preserve any potentially relevant information thereby avoiding the expensive traps associated with electronic information.