Failure to produce required electronic discovery can have serious consequences, as borne out by a $1.25 million sanction just issued by a New York federal judge against two law firms and the insurer they represent relating to electronic information that was deleted and hard copy material that was not produced in the In re September 11th Liability Insurance Coverage cases. And, according to a recent survey, this may not be an isolated event, as it appears that many companies are not in a position effectively to comply with electronic discovery amendments to the Federal Rules of Civil Procedure (FRCP) that went into effect late last year.

FRCP Amendments

As a refresher, under amendments to FRCP 16(b), parties must get ready for a scheduling conference to consider electronic discovery plans within 120 days of the start of a lawsuit. Moreover, at least 21 days before this scheduling conference, parties must meet and confer to discuss and try to agree upon electronic discovery procedures for the case, pursuant to FRCP 26(f). Accordingly, parties must be formulating their electronic discovery plans within the first 100 days of the life of a case.

Even though the purpose of these new rules is to provide early structure, uniformity and predictability, the truth is that right from the start of a lawsuit a party must start evaluating with its IT team and its outside counsel where it stands in terms of its own electronic data. Data can be located live on the network, on various servers, in hard drives, in share drives, on laptops and PDAs, as well as on backup tapes.

It should be no surprise that electronic discovery is expensive. There have been many earlier times that cases have resolved before the parties and counsel have been immersed in the burdens and expense of electronic discovery search, retrieval and production processes. Now by forcing these processes early at the outset, parties in federal cases really have no choice but to move forward with electronic discovery at the start of a case.

Importantly, Rule 26(a) broadens the definition of electronic items that may be subject to discovery from "documents" or "data compilations" to include all electronically stored information. Therefore, while previously parties might have been able to try to shield certain types of electronic information from discovery, conceivably the other side now can demand everything from standard Word documents and emails to voicemail messages, instant messages, blogs, backup tapes, and database files.

Nevertheless, parties still can argue that the burden of any particular demand outweighs the potential probative value of the electronic information sought. Whether a judge will agree with that argument is another matter.

Survey Results

LiveOffice Managed Messaging Services, a provider of on-demand messaging security, archiving and compliance solutions, has just released findings from a survey that show that many companies are not prepared to comply with the foregoing FRCP amendments.

Indeed, of the 400 IT managers and end users polled on a nationwide basis, while 63% already have been required to produce email as part of litigation, 53% admit that they are not in a position to meet all of the requirements of the FRCP amendments, and 52% do not have an e-discovery plan that has been prepared by legal counsel. This is troublesome. Indeed, 28.9% of the respondents were not even aware of their FRCP obligations.

Incredibly, nearly one-third of respondents would not be able to produce an email that is one-year-old if required. This might result from the fact that approximately 25% of companies purge their emails manually or automatically after 90 days or less. While it is not against the law to have record retention/destruction practices under certain circumstances, data cannot be destroyed once a company is on notice that the data relates to issues relevant to potential or actual litigation.

Get The Job Done

It is no wonder then that IT managers cringe when it comes to e-discovery requests. Many respondents find that only dealing with the IRS is a more unpleasant activity than dealing with e-discovery demands, and more than half would rather have a cavity filled by a dentist than have to deal with an e-discovery request. I kid you not.

Companies need to recognize the imperative of meeting their e-discovery obligations, especially given the scope of related responsibilities. According to the survey, an average employee will send and receive more than 135 emails daily. Thus, a mid-sized company with 500 employees will generate 17.5 million emails per year. (Moreover, the average employee spends 2.5 hours weekly managing his email box; meaning that a mid-sized company with 500 employees potentially loses 65,000 hours of productivity annually). Naturally, the magnitude is far greater for much larger companies.

Often times the most critical evidence is found in electronic communications, as people tend to be less formal and more spontaneous when responding quickly via emails and the like. Failure to understand how to preserve electronic evidence is not a legal defense, obviously.

If you are a company that does not have its electronic data house in order when it comes to e-discovery demands, now (frankly, yesterday) is the time to work with counsel skilled in this area and also to consider technological data management solutions.