Every business owner needs to understand that electronic discovery or “e-discovery” is a fact of life in all litigation today. Simply put, e-discovery is the request of the adversary’s documents and other materials relevant to the dispute that were generated or are stored electronically (electronically stored information or “ESI”). Regardless of the size of the business or the size of the litigation, the overwhelming majority of documents and other materials -- upon which litigation claims and the defenses to those claims are based -- are generated and stored electronically. Communications between parties that used to be in the form of letters or memos are now in the form of e-mail, voice mail and text messages. Contracts and similar documents are created on the hard drives of computers where they and earlier drafts of those documents often continue to reside. As a result, a business owner must pay particular attention to ESI now to make sure the business is prepared for e-discovery when litigation is anticipated or filed.
Document Policies and Litigation Holds
One of the most important steps that a business should take is to formulate a rational document retention/destruction policy of what hard copy documents and materials, and what ESI, including e-mail, should be maintained and for how long. The most important consideration in developing such a policy is not with an eye toward how to prevail in, or avoid litigation. Rather, it is the everyday needs of the business. If a business follows a reasonable retention policy and documents that would otherwise be discoverable in, and relevant to, litigation have been destroyed or deleted pursuant to that policy before the litigation was anticipated or filed, a court will not sanction or otherwise punish the business. However, courts have ruled that when litigation is threatened or reasonably anticipated, a business has the obligation to suspend its regular policy (a “litigation hold”) so that those documents and materials that are reasonably related to the subject matter of the anticipated litigation are not destroyed or deleted. When litigation is threatened, anticipated or filed and a business does not suspend its normal retention policy and establish a litigation hold, a court may sanction the business by dismissing a claim or striking a defense or an answer, or making an adverse inference, that is, determining that the destroyed or deleted information, if it had been produced, would have been unfavorable to the party that destroyed or deleted it.
E-discovery issues have fostered new trends in litigation. One such trend is to notify an adversary at the time litigation is filed, or even earlier, of the need to establish a litigation hold -- if one has not already been put into place because of the anticipation of litigation -- regarding categories of potentially relevant documents and other materials maintained or stored in both hard copy and in electronic format. Rule changes in certain courts now require counsel to meet and confer immediately upon the commencement of litigation to discuss issues involving the production of ESI. As a result, lawyers are spending more and more time speaking to their clients, their adversaries, and the courts to resolve the multitude of issues that now arise as a result of ESI.
Cases in which the “smoking gun” is discovered in an e-mail or other electronically stored document and immediately affects the outcome are generally the exception rather than the rule in litigation. More typical problems arise when the issue is whether the ESI is accessible (and the cost to access it), fee shifting of the costs to produce ESI, or when potentially relevant material has been deleted and destroyed -- either prior to or after a litigation hold was or should have been put into place. These issues may compel settlement or affect the outcome of cases and may be the new “smoking guns” of litigation.
The costs and anticipated costs of e-discovery have had an impact on the settlement calculus. As a result, the cost benefit analysis engaged in by parties and their counsel as to whether to litigate or settle occurs earlier in litigation or even before litigation is filed. While the cost of discovery has always been a significant factor in the determination of whether or when a case should be settled, the costs related to extensive e-discovery have further pushed the scales toward earlier consideration of settlement.
There are a variety of direct and indirect costs triggered by e-discovery requests. These costs include the time and expense associated with (a) creating and maintaining use, retention and back-up policies for email and other ESI including voice mail, text messaging, and the use of personal email accounts, personal computers, social media sites, and blogging; (b) creating and maintaining litigation hold policies; (c) convincing management and rank and file employees to get on board with these policies; (d) responding to requests for ESI and devising search parameters; and (e) determining if there is a need to hire outside vendors and consultants. These costs are triggered not just by e-discovery requests but by the fact that we live in a digital world.
While those responsible for maintaining computers and networks may be most affected by the search for relevant ESI that must be produced to an adversary, all employees must pay close attention to document retention policies and litigation holds. It is unlikely that courts will be sympathetic to the fact that time or energy must be spent responding to legitimate discovery requests. Parties will have the best opportunity to challenge discovery of ESI when the time, cost and effort will substantially outweigh the likely significance of the discovery sought and if the ESI is inaccessible because it is store on old formats that are difficult to search. Courts will engage in an analysis as to whether the costs of discovery outweigh its anticipated significance and whether the party seeking the discovery should have to pay for the costs associated with retrieving it.
Other E-Discovery Issues
There are a multitude of other e-discovery issues that have challenged businesses, lawyers and the courts. For example, when an electronic document is created, the document will contain “meta data” – information about the document that was never intended to be seen by the outside world such as when the document was created or edited and by whom. This information changes as documents are accessed and edited. Courts have struggled with the issue of whether meta data should be produced. Also, many people fail to realize that the deletion of an e-mail or other electronic document does not necessarily remove those files from the computer. The “deleted” information may stay there until it is overwritten by other information. That may or may not happen and the information may be recoverable with software designed to recover deleted information unless the ESI is “wiped clean.” As one might imagine, damaging evidence may be found in “deleted” electronic documents.
E-discovery issues have created a new minefield in litigation involving thorny questions and unexpected costs. Every business has an obligation to be aware of these issues and should consult with counsel regarding new developments in the law.