Preserving and Gathering Electronic Data in the Age of E-Discovery
For companies large and small, navigating the electronic discovery ("e-discovery") process in litigation can be a tricky proposition. To begin with, electronic data is more pervasive than ever. Kroll Online estimates that thirty-six billion e-mails are sent worldwide on a daily basis; and that this number rises some twenty percent each year. And E-mail is only one of several kinds of electronic data that is discoverable in litigation. Therefore, every company should have a New Year's resolution to ensure that the company has a comprehensive, workable protocol in place for the preservation and production of electronic data.
Need more incentive to make this your New Year's resolution? Federal and state judges have repeatedly imposed large discovery sanctions against companies for failing to preserve and produce relevant e-discovery. In a recent example, a state court in Minnesota punished Burlington Northern Santa Fe with a $4.0 million sanction for exhibiting a pattern of misconduct related to the production of electronically generated information associated with whether a railroad crossing gate was working properly at the time of an accident.
Despite the ever expanding growth of electronic information, and the increased propensity for federal and state judges to punish corporations for e-discovery abuses, an international survey of information technology ("IT") departments and in-house counsel reveals that approximately one half of large U.S. companies do not have a policy in place to preserve and manage their electronic information.
So how does a company stay ahead of the curve and protect important electronic information necessary to meet preservation and production duties? This litigation alert outlines a broad step-by-step approach to assist corporate IT departments and in-house counsel in establishing a protocol for preserving and gathering e-discovery materials until such a time as it needs to be produced in litigation.
Step One: Assess your "electronic footprint." By now you have heard about your "carbon footprint," but did you know your company also has an electronic footprint? An electronic footprint is the combination of all the electronic data, and the media on which it is stored, generated by (or sent to) your company. The first component of the footprint, the media, often includes office hard drives, laptops, personal computers, external hard drives, CD's, DVD's, servers, and even smart phones. After tracking down the tangible sources of where your company's data may be located, you can then examine the second component of the footprint, the electronic data. Electronic data is the actual information contained on the media. This data can be e-mail, word documents, word perfect documents, spreadsheets, voicemails, texts, instant messages, and even web pages. After determining your company's electronic footprint by identifying all sources/locations of electronic media, and the type/format of electronic media utilized, a company must then establish a system for the preservation, maintenance, and destruction of electronic information.
Step Two: Establish and follow electronic data storage and destruction procedures. While most companies have a paper or "hard document" retention/destruction policy of some type, the majority of companies do not have an electronic data retention/destruction policy in place. Those that do not have such a policy should consult with Counsel and take the necessary steps to immediately establish such a policy. The policy should first focus on preservation of electronic data. If you have determined your company's electronic footprint, and are aware of the location and type of electronic data generated and received by the company, you are armed with a key piece of information necessary to determine how to back up that data. Routine data backup procedures should be implemented and followed relative to the type of media that stores the data and should be designed to ensure that data is not inadvertently destroyed in the day-to-day operation of the corporation.
Due to the rapid growth of electronic information, and the expense related to storing what seems to be infinitely growing information, a company's protocol must include measures for the regular "recycling" of electronic storage space. The recycling process should be a regularly scheduled event and should follow the procedures that you outline in your policy. Again, consultation with Counsel while creating this policy is very important. Recycling should only be utilized for reclaiming space and may not be used as an excuse to destroy information that the company knows may be subject to litigation or that it has a common law or contractual duty to maintain.
Step Three: Designate responsibility for electronic data. Like any good plan, the company needs someone to execute and be responsible for it. The electronic data preservation/destruction policy should identify those individuals responsible for preserving and maintaining the company's electronic data. The creation and execution of a corporate strategy for the preservation and recovery of electronic information should come collectively from the IT department and legal counsel and should be supported by management. The legal department (or outside counsel) appreciates the nature and type of data that is discoverable and relevant to a given legal matter. The IT department, on the other hand, appreciates the manner in which the data is created, stored, altered and destroyed. Collaboration between these two departments is essential to establishing and enforcing the electronic information protocol. Therefore, those two departments will likely have the appropriate individuals who should be designated as responsible for storing, maintaining and producing electronic information. Special care should be taken in the selection of these individuals, because they may be called upon in the future to testify as a "corporate representative" regarding the electronic data preservation, production, and destruction practices of the company.
Step Four: Set up procedures for a litigation hold. The company's policy should also include procedures for implementing a "litigation hold." A litigation hold is the suspension of the company's electronic and paper document retention/destruction policy to ensure that information relevant to a particular lawsuit is not destroyed. Many companies report that they do not have a mechanism in place to suspend their document retention policy. The inability to implement a "litigation hold" could result in serious discovery issues in litigation, up to and including sanctions by the court. Therefore, it is imperative that the company set up a procedure to stop the systematic destruction of information as soon as the company learns that a litigation hold is necessary. Failure to protect electronic information after litigation is anticipated could result in sanctions against the company for failing to do so. In addition, it could result in the inadvertent destruction of important information necessary in the prosecution or defense of the litigation.
Generally speaking, a litigation hold requires the preservation of items that are relevant to the issues involved in anticipated and/or pending litigation. The determination of the types of information and time frames for preservation that should be included in a litigation hold should be made with Counsel to ensure that the company is protected. The determination will usually include the following factors that must be considered: (a) relevant time period; (b) relevant custodians; (c) relevant subject matter; and (d) applicable electronic sources. The scope will largely be controlled by the factual and legal allegations raised in the pleadings if suit has been filed.
Following these steps is but a start to developing a comprehensive e-discovery policy. The development of a comprehensive policy should be done in advance of litigation. Waiting until the company has been sued is not a viable option. Ignoring the problem will inevitably result in more problems in the future. Therefore, do not procrastinate on this important New Year's resolution!