Electronic Evidence: The Rules Get Even Tougher
from
July/August 2007
by Lisa Ferri
Companies are scrambling to interpret and live up to new legal obligations governing that mysterious half-charted territory called electronic discovery. As Michele Lange, an attorney with the Ontrack discovery division of risk consulting company Kroll Inc., puts it, “E-discovery has gone from a best practice to a required practice.”
Essentially, the new rules, included in December’s amendments to the Federal Rules of Civil Procedure, set in stone many processes companies had been wise to have in place already, explains attorney Brian Coggio, a partner in the New York City office of Greenberg Traurig. “The difference,” Coggio says, “is now you can no longer ignore them. You are forced to address e-discovery not only early on but from day one of a case, during the pretrial phase.”
Under the new rules, the scope of what’s discoverable has exploded. According to Carl Roberts, a partner with Philadelphia’s Ballard Spahr Andrews & Ingersoll, what is fair game isn’t limited to ordinary e-mails, voice mails, BlackBerry messages, and IMs anymore. “The new rules broaden the list to virtually anything electronic,” he says. For example, not only may an electronic invoice be discoverable, but also the vast system that houses it—a virtual web of documents and e-threads that can stretch around the globe. By Roberts’s math, before the onset of electronic evidence the number of discoverable documents in a typical medium-level case hovered around 50,000. Now that number has ballooned to more than 300,000 documents per case—and counting.
As the sheer volume swells, so does the likelihood of legal hiccups—in particular, inadvertently turning over privileged information to the other side. That is bound to happen, says Roberts, when you’re faced with an avalanche of e-evidence. But the new rules do provide a safety net. Now, before a case gets under way, both sides must work out a set of recall rules to delineate which privileged documents that slip through the cracks will be sequestered, destroyed, or returned to their rightful owners until the judge decides whether they’re fair game. Lawyers call it a clawback; laymen call it an “oops!” rule.
The expanding universe of electronic evidence requires intense detective work—the kind of sleuthing that can cost big bucks. The new rules compensate for that with a “needle in the haystack” provision. If an e-document is too difficult to find—say, a backup tape or a deleted file—“the company doesn’t necessarily have to look under every last rock to find it,” explains partner Peter Toren of Sidley Austin’s New York City office. If the other side insists on having a particularly obscure scrap of electronic evidence, it may be forced to cover the discovery cost.
The new rules also take into consideration that some e-information will be deleted in the normal course of business. A “safe harbor” rule prevents companies from being slapped with hefty punitive sanctions as a result. As Roberts explains, it’s a nod to the reality of doing business in an electronic age: “Some computer systems move so fast and handle so much data that trying to stop them to retrieve electronic evidence would bring the business to its knees.”
That’s the good news. The bad news? As far as the courts are concerned, companies have now been given fair warning that they must put a comprehensive e-discovery plan in place or face the consequences. And that’s no small task, especially considering the mismatch between the lawyers who are translating what the new rules mean and the IT experts who are left to fix things. “Remember, IT people are from Venus and lawyers are from Mars,” says Kroll Inc.’s Michele Lange. “They don’t speak the same language, and document destruction can happen as a result.”
What’s a board member to do? Plenty. Lange suggests that boards start by forming a “litigation response team” staffed by an in-house lawyer, outside counsel, a senior manager, and a member of the IT group “who’s actually familiar with the company’s backup-tape recycling policy—someone in the trenches, in other words, probably not your CIO.”
Hammering out a comprehensive document-retention plan is only half the equation. The other half? Enforcing it. Just look at Arthur Andersen, says Roberts: “They had an excellent document-retention policy, one they completely ignored.” Dropping the ball on enforcement can “turn around and bite you very hard,” he notes. By “you,” he means the audit committee. “Ultimately, oversight of document-retention policy rests with them,” he says. “It all comes back to the board and the audit committee.”
Even with the clarification provided by the new rules, warns Coggio, “e-discovery remains a black box”—and the road ahead may hold some unpleasant surprises. His best advice? “You always want to wear the white hat. If you’re coming to court saying you didn’t maintain critical documents, will you still be wearing that white hat when discovery is over? No.” For board members, this means putting the company’s electronic-evidence policies under the microscope and using the power of the purse strings to give them a pricey makeover if necessary—something Forrester Research of Cambridge, Massachusetts, predicts is in nearly every company’s future. Forrester, a leader in tech and market research, believes the amount companies collectively spend on e-discovery technology will swell from last year’s $1.4 billion to more than $4.8 billion by 2011.
Coggio urges you, too, to start spending. “Don’t wait until someone files a suit to start worrying,” he says. “Worry now.”
