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What Businesses Should Know About E-discovery

Authors: Kerry Shepherd

The papers land on your desk with a thud – you’ve been notified of a lawsuit against your company, just as you were preparing to leave the office for vacation. Instead of finalizing travel plans, you’re faced with a different problem. The papers demand that you preserve voluminous information stored electronically. What do you do now?

Ten years ago, this scenario would have largely been limited to preserving paper in filing cabinets. The proverbial “smoking gun,” if it existed, probably was found in a memo or stored away among thousands of otherwise innocuous documents. It’s a different story today.

Technology has advanced to the point where information that could break a case is more likely to be locked away in electronic storage devices – somewhere beyond the click of a mouse. And while technology is an efficient tool, it has created new challenges and opportunities in civil lawsuits, regardless of size and import. Businesses must understand and prepare for the electronic discovery, or E-discovery, process to ensure they appropriately preserve and produce evidence. By doing so, they will avoid harming the case or finding themselves in a situation where the costs of dealing with electronic evidence exceed the value of the lawsuit itself.

The volume of electronic sources and the data stored there can be staggering. One reason is that electronic files are stored more easily and in myriad areas and devices. Another reason is that deleted information, while not obvious to the user, may still exist and can be recovered by computer forensic experts. Computer programs also create new, never-before-available information called metadata, which is hidden from the eyes of the user and typically can identify who created the document, who accessed or modified it, what modifications were made, and when.

Many common sources of electronic evidence can be fertile ground for E-discovery, including: email, network servers, home and office computers, drafts and modified versions of final documents; hidden comments; Internet surfing logs; PDA files; voicemail systems; text messages; TIFF and JPEG images and graphics; MP3 files; cookies; chat rooms; bulletin board postings; and many other sources.

Don’t be fooled into believing E-discovery is reserved for massive lawsuits. Electronic evidence may be relevant, if not critical, in employment cases, personal injury, product liability, construction defect, and garden-variety real estate and business disputes. Consider, for example, recent events surrounding former Portland Police Chief Derrick Foxworth. Mayor Tom Potter demoted then-chief Foxworth due in part to a “serious lapse in judgment” as reflected in email regarding a subordinate with whom he had a relationship. Undoubtedly there were experts fishing through the City’s network servers, email folders and deleted files to locate and analyze this electronic evidence.

Another example is Zubulake v. UBS Warburg, a gender discrimination lawsuit. The plaintiff’s attorneys asked UBS to produce email that would support her discrimination claim. UBS complained that it would be too costly to restore and search 72 backup tapes in response to Zubulake’s E-discovery requests. The cost was estimated to be $167,000 simply to restore the data to an accessible and readable format, followed by significantly more expense to review the data. The court sided with Zubulake and placed the burden squarely on the shoulders of UBS, requiring the company to pay 75% of the costs of restoring the data and 100% of the review and production costs.

Events like these are becoming more commonplace. Yet judges and lawyers continue to struggle with rules by which to balance the benefits and burdens associated with E-discovery. The good news is that E-discovery need not be overly expensive, despite the fact that a single CD-ROM can contain over 325,000 typewritten pages.

While computer data can be immense, much of it can be searched electronically. Adversarial lawyers can and should work cooperatively to design searches to meet the needs of the case. If the attorneys cannot agree, the court can step in to limit searches of appropriate number and scope to cull the legally relevant data. In more significant cases (and at greater cost), the parties may hire opposing experts to understand the parties’ respective computer systems and negotiate appropriate searches, or the parties may jointly hire a single expert for assistance in this regard. In short, the technology leaves the door open for many possibilities to save litigation expenses.

Electronic data, of course, must be maintained before it can be searched for E-discovery purposes. Thus, before leaving on that vacation after receiving news of a civil lawsuit, there are several tasks you have hopefully already undertaken or can accomplish in short order:

• Understand Your Systems: First and foremost, you or one of your employees must understand how electronic data is maintained, saved and backed up in your company, and how it can be retrieved and searched.

• Don’t Overwrite E-information: Electronic data can be volatile and sometimes overwritten – i.e., possibly destroyed – in the normal course of business. To avoid a claim for spoliation, or destruction, of evidence, speak with your information technology specialist promptly about the lawsuit. Make sure any existing document destruction or information retention policies are abated until you know more and have an opportunity to get clear direction from your attorney. Specifically, make sure any backup tapes are not overwritten in the interim.

• Communicate with Key Departments / Employees: Read the legal complaint to understand the nature of the allegations, and identify, if possible, which employees or departments are likely to have responsive information in their files or on their computers in the office or at home. Tell them, in writing, not to destroy any relevant information in the normal course of business until further notice.

And, as always, call your attorney promptly. Lawsuits, including demands to maintain documents, should not be handled lightly in any circumstance. Your attorney can help your company avoid spoliation issues and maneuver away from decisions that could be costly mistakes.

This article was published in the Portland Business Journal on August 4, 2006.