United States: E-Discovery Survival Guide For Corporate Counsel

Originally published in The St. Louis Lawyer, Feb. 2007

While no one course of action is appropriate for all corporations, there are some basic steps to prepare for that first e-discovery challenge, none of which guarantee success. On the other hand, failure to recognize the challenges of complying with the e-discovery rules is more likely to lead to disaster.

Here are a few thoughts on recommended survival tactics to maneuver through the e-discovery minefield.

1. Update and enforce your records management policy.¹

Prudence and good corporate management dictate that every business should have a records management policy. Such a policy informs employees about the documents they are required to keep as a matter of law or regulation or business necessity. It establishes procedures for the maintenance of records, and equally important, it outlines when records may permissibly be destroyed either because the legal retention period has expired or the business necessity no longer exists.

Having a sound records management policy and system in place are the first steps towards meeting the e-discovery challenge. One of the grave risks of e-discovery – indeed all discovery in litigation or governmental inquiries – is the loss of critical evidence without a justifiable explanation. A records management policy provides the framework for outlining to the opposing party and the court the types and categories of records that are likely to exist, and if not, why. It also increases the efficiency with which relevant documents are likely to be located and produced. If properly practiced, the recycling or destruction of records at the termination of the retention period will reduce the need to wade through documents that should have been disposed of years earlier.

In the context of electronic discovery, it is important to ensure that records management policies recognize the many different types of electronic documents that may be created in a corporate environment and provide adequate instructions to employees regarding their duty to preserve and the manner, method and location of preservation. For example, a policy may mandate that work-related documents or information created on a lap top or a remote PC must be downloaded to the corporate network for preservation. A policy may also mandate that employees save all work product to a designated server rather than their individual hard drives, thumb drives or other removable media, and designate the naming convention for such documents.

Long before the e-discovery rules were put into place, courts imposed a duty to preserve all "relevant documents" once litigation is "reasonably foreseeable." What documents are "relevant" and when litigation becomes "reasonably foreseeable" are questions of fact for each case. Unfortunately, these fact issues all too often create opportunities to second guess decisions made prior to the filing of the lawsuit. To minimize the risks, both house counsel and records managers should be attuned to the need to watch for and anticipate potential litigation and be prepared to implement a litigation hold when that contingency arises. Among other things, the client’s records management policy should recognize the possibility that a legal hold may be imposed on certain documents or categories of documents for anticipated or pending litigation.

While the requirement to preserve documents in a litigation hold is not new, the focus on electronic documents has greatly increased since the adoption of the e-discovery rules. This means that systems must be in place to ensure the preservation and accessibility of relevant electronic documents.

A good early warning system trains managers and officers of the need to advise corporate counsel of the risk or threat of litigation, or of incidents that customarily give rise to litigation. The preservation duty may be triggered by an event that is reasonably likely to lead to the filing of a lawsuit, e.g., a motor vehicle accident, although the event may not ordinarily come to the attention of house counsel. An early warning system would ensure that the information is communicated through the proper channels to determine if and when litigation is "reasonably foreseeable" for purposes of a litigation hold.

It is no longer adequate simply to send out a memo stating: "We’ve been sued; please hold all relevant documents." Proper implementation of a litigation hold requires:

• Providing detailed and adequate instructions to employees about what must be held by subject matter and document type.

• Personal follow up with the key employees to ensure that the memo has been received, acknowledged and implemented.

• Periodic compliance checks to promote ongoing adherence.

There are likely to be multiple personnel changes during the course of protracted litigation. Personnel need to be advised of their duty to preserve existing documents and, where appropriate, documents created in the course of ongoing business, as they rotate in and out of the company or change positions. If anything, the loss of a relevant document during the pendency of a litigation hold is even a greater risk of sanctions than a failure to hold the document in the first place. The latter may be excused on the basis of a record management policy or lack of notice, while the former may be deemed spoliation or gross mismanagement.

Do you know where to look to find relevant documents? Think again. Many, if not most, corporations have failed to adopt adequate controls over their system to ensure that electronic records are stored in a way that makes them identifiable and retrievable. Do your users have access to shared network drives where they can store material? If so, what controls exist on what documents may be placed there and how they must be named? Is it possible to identify the author without extraordinary forensic efforts so that you can determine whether a document is worth reviewing? Likewise, corporate policies with respect to both the use and retention of e-mail are often fairly loose. Users may find their way around policies that dictate what and how e-mails may be preserved and for how long by squirreling them away to a shared network drive, local hard drive or CD. This result is thousands of "orphaned" e-mail boxes stored throughout your network, each of which might have to be searched to respond to any given electronic discovery request.

Adequate preparation for electronic discovery means imposing discipline on users and adopting computer use policies and network architecture to minimize the risk that users will create e-discovery land mines throughout your system.

Understanding the obligations of e-discovery is more than simply reading the amendments to the Federal Rules of Civil Procedure and the accompanying comments. It is important, for example, that IT personnel understand their duties with respect to e-discovery and the risks for failure to respond properly to e-discovery requests.

Key among the responsibilities is a duty to conduct a reasonably diligent investigation to determine where data is likely to be stored. Absent this exercise, responsive data is likely to be overlooked, thereby opening the door to the risk of sanctions.

Equally key is understanding the risks of improper collection techniques. The risk of spoliation of electronic evidence is exceedingly great. Spoliation, the improper alteration or destruction of data, can occur inadvertently if electronic data is not properly processed. Sanction orders have been entered against parties who failed to understand and meet their responsibilities for proper evidence collection. Impressing the importance of these issues on IT personnel is critical.

Likewise, legal and administrative staff must be educated proactively on the fundamentals of electronic discovery, in part to instill an understanding of the importance of responding thoroughly to an electronic discovery request and the risks for failure to comply.

For most business enterprises that face a frequent risk of litigation, it is a mistake to wait until the first request for production is delivered to counsel’s door to begin thinking about how and what electronic discovery should be collected. A reactive approach may unnecessarily increase the discovery expense and result in chaos and mistakes.

As a part of e-discovery readiness, a company should proactively examine its systems and its information technology infrastructure. It also should identify tools that can facilitate the collection of data, including the identification of outside consultants who can assist in or oversee the collection with minimal disruption to business.

Each company must decide, given its systems, business and the nature of the litigation at hand, whether to use in-house personnel or retained consultants to collect electronic documents for potential production. If the former, a company cannot safely assume that in-house technical personnel will instinctively know what’s required to meet the company’s discovery obligations. In-house personnel must be given the necessary tools to minimize the risk of data corruption during the collection process, instructed on the format in which data is to be collected (i.e., in its original or native format) and counseled on proper chain of custody documentation.

A plea of computer illiteracy from outside litigation counsel is less likely in today’s techno-environment to prompt sympathy from the bench when ruling on a motion for sanctions for failure to produce or spoliation of relevant electronic documents. Counsel must prepared to address electronic discovery issues, regardless of how far removed they may appear to the actual practice of law.

An appointed corporate e-discovery liaison can serve initially as a consultant to outside counsel to assist in meeting the company’s obligations to meet and confer early with opposing counsel on likely sources of relevant electronic information, the accessibility of that information and its preservation. Ideally, the liaison should have a working knowledge and understanding of the company’s computer system and can relay that information in a meaningful way to outside counsel. In addition, the liaison should understand the procedures for identifying and retrieving relevant and responsive data, and should possess sufficient authority to facilitate or coordinate that collection. The task of responding to electronic discovery should not be assigned to the most junior member of the law department or a senior paralegal unless those individuals are fully attuned to their responsibilities and have the requisite technical knowledge and support to follow through.

Finally, the e-discovery legal landscape is ever-changing. Decisions are published daily. A company that commits to an e-discovery readiness plan must proactively evaluate the developments in this area to determine whether any changes are required. It must ensure that key personnel are aware of changes as they are made. IT must also ensure that the readiness plan keeps pace with the inevitable changes to the company’s technology infrastructure.

It is often said about e-discovery that it is easier to get it wrong than it is to get it right. It is undoubtedly one of the greatest risks that a company faces in litigation today. Failure to get it right can lead to the loss of the most defensible lawsuit or to costly sanctions. Failure to get it right can compound the cost of litigation. Failure to get it right could result in court-ordered intrusion into the company’s system.

Failure to get it right may result in "death by e-discovery."

1. Although the term "policy" is referenced in the singular, depending on the size and complexity of an organization and the regulations governing its business, it is not unusual for a corporation to have a multitude of records management policies. Those policies may differ by subject of the documents, the purpose for which they are created or retained, location or a myriad of other factors.

© 2007 Arthur L. Smith and Jeanine Bermel

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.