Are You e-Discovery Ready?

Ready or not, here come the lawyers. If you’re in litigation or responding to regulators, you’d better be e-discovery ready.

Indeed, one of the most pressing legal issues of the day concerns how corporations in all industries face increasing pressure to proactively manage retention and handling of various forms of corporate records for compliance and legal discovery. Electronic discovery is the process of obtaining, reviewing and producing digitally stored evidence in response to litigation or regulatory requests. Consider that over 90 percent of business documents today are created and stored electronically, and 60 to 70 percent of corporate data resides in or is attached to e-mails (National Law Journal, July 17, 2006). Enterprises need to be prepared to retrieve and analyze terabytes of data on request, across an increasingly vast terrain including email, instant messages, handhelds, laptops, enterprise networks, databases and voicemail. Call it e-discovery readiness.  


E-Discovery Can Be Costly

Even under the best of circumstances, e-discovery can be costly. Most businesses are unaware of the potential fees involved in document reviews performed by attorneys and the associated expenses related to actual electronic data processing. Depending on the size and scope of a document review, and the type of data at issue, costs can be relatively low. However, the complexity of a large-scale review can easily inflate costs to well over a million dollars. While advances in e-discovery processing technology have greatly assisted in reducing the costs and volume of actual reviews, expenses still remain a strong challenge for businesses unprepared for litigation involving e-discovery. In addition to fees, there are potential penalties for failing to be e-discovery ready. Critical new e-discovery amendments to the Federal Rules of Civil Procedure (FRCP) — a statutory system that governs litigation procedures and practices in federal court — took effect Dec. 1, 2006. Prior to that, federal courts had struggled with how to treat discovery issues involving electronically stored information (ESI). Many decisions produced varying results based on similar fact patterns which, in turn, produced a diverse and confusing set of precedents. In order to create uniformity for future litigation within federal court, the FRCP were amended to, among other items, force businesses to become better organized with their maintenance of electronic data—a common issue in litigation involving electronic discovery. The key message of the FRCP amendments is that if businesses do not properly manage relevant ESI prior to and at the inception of litigation, they will not be able to meet strict discovery and other procedural deadlines. Even worse, without proper internal safeguards in place, businesses may inadvertently destroy or misplace relevant data. These types of missteps will not only curry disfavor with the court (and potentially result in severe contempt fines), they may also cause the court to instruct the jury to infer that those “missteps” are evidence of misconduct, potentially tipping verdicts and indirectly inflating punitive judgments. Conversely, nine of 10 companies with comprehensive e-discovery strategies managed to avoid fines or a lost legal proceeding, according to a recent study by Aberdeen ( News - Alert)Group. “Survey participants with over $1 billion in revenues reported an average legal discovery cost of $997,000. Best-in-Class companies experienced significant cost savings and lowered litigation risks by implementing a comprehensive e-Discovery strategy in their organization,” Ralph A. Rodriguez, senior vice president of technology research, Aberdeen, said in a Jan. 10, 2008 news release. “Furthermore, Best-in-Class companies are able to recover archived data, records, and messages in less than one hour and complete legal discovery requests on time an average 94 percent of the time.

Urgent Business Priorities

These and other issues make it evident that being proactively prepared to comply with discovery requests and understanding the FRCP amendments are urgent business priorities. However, many businesses are experiencing challenges that render them less prepared than they’d like to be. One of these challenges is sheer confusion surrounding the FRCP. Only one in 10 corporate attorneys say they understand the changes to the FRCP very well, according to a recent survey by Océ Business Services. One in three would admit they do not understand the FRCP very well. Another challenge is records management. Nine out of 10 corporate attorneys admit their company’s records management program is vulnerable when it comes to ESI and preparedness for electronic discovery, the survey found. A third challenge is deciding whether to in-source or outsource business processes related to electronic discovery. In responding to this challenge, six in 10 enterprises surveyed plan to establish a mix of internal electronic discovery expertise and external expertise. The prevalent law firm practice in managing client electronic discovery data is through a combination of corporate applications and outsourced processing services. In order to effectively deal with these and other discovery-related challenges, corporate legal departments are taking a more hands-on approach to litigation management, particularly when it comes to ESI and records management programs. Businesses focused on best practices indicate that they intend to adopt repeatable discovery processes, technologies and services that will work for regulatory requests and internal investigations as well as litigation.

From Reactive to Proactive

Organizations become e-discovery ready by shifting from a largely reactive posture to being proactively prepared. To achieve superior discovery preparedness, forward-thinking organizations are implementing new processes and technologies that ensure discovery readiness — call it a unified e-discovery platform. This unified approach recognizes the interconnectivity of records, paper and electronic discovery, and compliance processes. Specifically, if sound business practices can be applied to each of these categories — and, more importantly, be aligned with one another — the result will be a business system that can handle even the most data-intensive litigation. Any organization implementing a unified e-discovery platform should carry out several basic steps for starters:

  • Assess strengths and weaknesses. Assess the strengths and weaknesses of the company’s current document management efforts (both electronic and hard copy). Take a close look at document lifecycles, from creation to storage. Electronic data storage practices should be given significant attention, especially for larger organizations. Also, a clear plan should be in place that ensures that the manner of storage for both paper and electronic documents are aligned to each other. After the evaluation, determine if the company is capable of correcting deficiencies or if outside assistance is required. The purpose of this type of evaluation is also to focus on the ease with which the company’s different processes integrate with one another. In some instances, an internal evaluation will reveal that a much more in-depth independent assessment may be required.
  • Document the data architecture. When litigation arises that involves e-mail or other computer data, the opposing party frequently seeks access to those records. State laws vary significantly on this issue. However, in federal court, the rules are clear. At the inception of litigation, both sides are required to discuss specific details regarding what type of data may be involved in the lawsuit and where it is stored. Thus, companies need to have a “data map” or other type of documentation that clearly explains the type of electronic data maintained by the company; the manner in which it is stored; and other details including any data deletion protocols in place. After the data architecture is documented, the company should review potential scenarios that challenge the company’s ability to ensure all data is secure and that state and federal compliance laws are adhered to. Further, it may be helpful to compare the data architecture to that of other companies of comparable size or type if such information is ascertainable.
  • Formalize, standardize and enforce policies for enterprise storage of electronic information. Review management efforts to communicate document retention policies with the company. Many enterprises do not have documented policies in place that require personnel to follow specific practices involving the handling of electronic data. This is one reason most businesses appear unorganized during litigation. Document retention and management policies (and all policy updates) should be communicated to all management and other key personnel. Further, similar to basic harassment or multi-cultural sensitivity training, pertinent company personnel should be trained with regard to laws that govern e-discovery. This will provide additional motivation to adhere to those policies involving document storage.

In order to effectively implement a unified e-discovery platform, corporate leaders and the IT teams in charge of electronic systems need to be on the same page. Then, and only then, will an alignment develop among key business processes sufficient to comply with the policies and procedures set forth by the amendments to the FRCP.

Original article by Ken Neal