Costs associated with discovery requests can be exorbitant, and the dollars involved are not the end of the story in terms of organizational impact. There is an array of other possible repercussions, ranging from disruption of business operations and monetary sanctions to the threat of criminal penalties and charges of obstruction of justice. In the process, one of the most valued assets of any organization – its reputation – also may be placed in jeopardy.

How Senior Executives View Electronic Data Management Policies

Senior Executives:

“ ... worry about what effect their compliance systems will have on their companies’ future. Almost half said they are concerned that their corporations’ failure to effectively archive and manage all their electronic documents could be a ‘critical liability.’”

“ ... 40 percent of those who do have policies for electronic records (such as an outline of how long e-mails are kept) said they are not effectively enforced.”

“ ... 58 percent of the survey respondents said their IT spending will increase.”

Source: CFO.com survey: IT Falls Behind on Compliance, September 18, 2006

Understanding the New Rules

For the meeting on discovery to be productive, and to avoid sanctions by the court, attorneys and litigants must prepare for the possibility of e-discovery well in advance. For instance, from the moment a party believes a lawsuit may be filed, and certainly no later than the date a complaint is served, steps must be taken to preserve all data that could relate to the dispute. This may mean that automatic deletion of e-mails must be stopped, documents scheduled for routine disposal must be retained, and computer “trash cans” must not be emptied. Similarly, it is not sufficient to simply make backup copies of ESI that may be subject to discovery. The original storage medium, such as hard disk drives or flash drives, must not be erased, reformatted, destroyed or discarded because in addition to the contents of any ESI file, the equipment itself may be discoverable. It may even be necessary to stop using the storage medium in order to prevent the spoliation, loss or overwriting of old data by newly entered data.

Counsel and responsible corporate principals also must become well-versed in the nature, contents and condition of any equipment on which ESI may be stored and any software that has been used to create, modify or manage it. Failure to fully appreciate the practical limitations of the ESI environment may cause counsel to agree to burdensome production goals and unrealistic deadlines, possibly incurring sanctions if those goals cannot be met. Parties propounding discovery requests must likewise be conversant in the technological aspects of ESI in order to determine what type of information should be sought and the format in which it should be provided. As a consequence of the foregoing, it likely will be advisable to have technology specialists who are familiar with the corporation’s data retention policies and equipment attend any discussions about e-discovery.

Clearly, companies must now address discovery issues and orchestrate a production plan much earlier in the process than they did under the old rules. So early, in fact, that few companies will be able to reach a settlement prior to thoroughly addressing discovery issues.