Changes to the federal rules on civil procedure affect the way businesses handle electronic data, especially when involved in a lawsuit.
“For the first time, electronic records are specifically spelled out into various provisions of those rules,” said Kurt Dykstra, an attorney at the Holland office of Warner Norcross and Judd.
Though electronic discovery is not new, Dykstra said, it has become more important because of the huge volume of information involved. Both the stored information itself and the ability to get at that information are crucial.
When facing the discovery process, attorneys need to meet with their clients to discuss issues and map out a discovery plan.
“This discussion has to also involve what kind of electronic discovery the parties want to engage in,” he said.
Dykstra said companies may have to rethink the way they handle technology, including their back-up systems.
“Companies may want to have an image made of an individual computer hard drive to use as evidence for the case,” he said.
Instead of continuing to recycle and reuse tapes for back-ups, Dykstra said, companies may need to save back-up tapes in order to use them during the discovery process.
Dan Gravelyn, an attorney with Barnes & Thornburg, said companies that have been involved in lawsuits over the past five years or so should be aware of the new rules. Companies that are not often involved in litigation do not have to be as vigilant about the changes, he said.
Changing a company’s electronic filing system can help save time and money in the event of a lawsuit, Gravelyn said, as long as it is done before there is an indication of pending litigation. If the system is changed after the threat of litigation is known, there could be serious consequences.
Gravelyn agreed with Dykstra, saying the amount of information recorded electronically has “exploded,” especially regarding e-mail.
“That’s the way people communicate in business,” he said.
The cost of identifying pertinent e-mails and documents as well as reviewing them can be extreme, Gravelyn said. Because attorneys bill hourly, it can become costly to have them review the thousands of e-mails that may be involved in a case.
Before discovery begins, the parties involved in a lawsuit will discuss the parameters of the process. Gravelyn said issues such as whether all e-mails should be reviewed or just those that turn up with relevant terms in a search must be determined. He said this also may affect how privileged records are handled.
“It can turn into a black hole for time and money,” he said.
Despite the changes, Dykstra said, there is a fine line between requiring information to be available and creating serious difficulty for the company.
“You can’t completely shut down a company from doing and engaging in day-to-day activities,” he said.
Once litigation is pending, companies need to be aware of what information is being erased or recycled daily and work to preserve data, rather than purge it.
“It’s so easy to inadvertently even modify or destroy documents on a computer system,” Dykstra said. “With paper documents you have to affirmatively do something; you have to pick up the piece of paper and turn on the shredder and stick the documents into the shredder. With electronic documents it doesn’t have to be that intentional.”
While a party that has “accessible” data, or data that is active on a computer, has an obligation to produce it and pay for its production, courts have been more willing to not require that “inaccessible” data be searched for and produced — and if it is required, the costs are more often shared or shifted to the requesting party.
Dykstra and Gravelyn agree that the first step to preventing costly electronic discovery is to not have the liability of information.
“Companies first and foremost need to try to minimize their electronic data,” Dykstra said. “Don’t create it if you don’t have to and get rid of it if you don’t need it.”
Gravelyn said employees should also be trained in proper e-mail communications so as not to run into problems with e-mail accounts.
Another way to prevent issues is by having a records retention program and by destroying and deleting non-essential information. One way to do this is by having a space limitation or time limitation on e-mail accounts.
Companies can also limit the amount of sensitive e-mails that are sent to employees by keeping legal memos and other sensitive information in paper form.
In commercial disputes, 90 percent of discovery is becoming electronic, whether it is electronic files or taking paper files and scanning them into electronic form, Gravelyn said.
Another part of electronic discovery is making sure that the systems that automatically delete information are turned off when a company is in the middle of a lawsuit. If information is erased during a lawsuit, the court has the discretion to impose sanctions and fines and to instruct the jury to assume that the worst information possible was in those documents that were not preserved as evidence.
If information is lost before the discovery process, the consequences can be dire for the party involved, Gravelyn said.
“Juries are always looking to see who wears the black hat,” Gravelyn said, and if they are instructed to assume the worst, it can have a devastating impact on the case.
Gravelyn said attorneys have been well informed and prepared for the changes in electronic discovery rules with seminars and well-publicized information.
Many law firms have increased or are increasing their information technology staff to work on discovery rather than just the firm’s own system, Gravelyn said. A possible data base of six or seven million records needs the expertise of an information technology professional, he said.
Dykstra said company leaders should also make an effort to include information technology employees in decisions.
“It seems like there’s a disconnect between the corporate decision makers and the IT personnel. And when the lawsuits arrive, usually lawyers get brought in but IT gets shut out.”
IT employees are often the first line of defense in lawsuits, Dykstra said.
“There needs to be a whole lot more collaboration between the business side of the company and the IT side of the company,” he said. “It wouldn’t be a bad idea to buy doughnuts for the IT side and drink coffee with them occasionally.” LQX