Policy Needed On Handling Electronic Data

May 20, 2008
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GRAND RAPIDS — The sheer volume of electronic information that can be processed, stored, altered, transmitted or destroyed at the stroke of a key has complicated the discovery process, the pre-trial exchange of information between parties in a lawsuit.

Electronically stored information can be found in voicemails, instant messages, text messages, e-mails, databases, spreadsheets, file fragments, metadata and digital images. It can be stored on hard drives, thumb drives, backup tapes, handheld devices and optical disks.

Since electronically stored information infiltrates just about every aspect of business life, most companies need to establish policies and procedures for dealing with it, said Attorney David W. Centner, a member of Clark Hill PC. 

The Federal Rules of Civil Procedure addressed “electronic discovery” with an amendment that went into effect Dec. 1, 2006. The amendment relates to locating and managing electronically stored information that could be potentially relevant in a legal dispute in federal court. The law obligates companies to preserve electronically stored information if a lawsuit can be reasonably anticipated. At least seven states have amended their civil procedure rules to include provisions like the federal provisions regarding ESI, and a number of others are considering similar amendments to their civil procedure rules.

E-discovery law has spawned an industry of forensic specialists who will assist companies in their electronic discovery obligations. Forensic specialists are necessary because the complexity of the technology is way beyond the average person’s grasp, Centner said. Clark Hill has an e-discovery practice group and retains forensic specialists to do data mining.

“It’s a major area of growth — not only for our law firm but for every major law firm. Whether or not there is litigation, there is a lot of consulting and advice that businesses require in order to operate in this new electronic world,” Centner said.

He said most larger companies — particularly those that have had legal issues arise over electronically stored information — have addressed the problem by establishing policies and procedures for the retention and destruction of electronic records, though many of the smaller, less sophisticated companies have not. But these days, e-discovery can play a role in nearly any kind of lawsuit involving a business, because with fewer and fewer exceptions, most businesses operate with computers. 

“E-discovery arises in every state and federal case, because computers and data storage systems are used in nearly every kind of business today,” Centner said. “There is a lot of litigation and a lot of motion practice in federal and state courts relating to whether or not a computer has discoverable information on it and how deep the other party can go. Confidentiality agreements are often negotiated and structured orders often entered to limit a party’s ability to go in and look at everything.” 

Cost of collecting and producing electronic information for discovery can run extremely high in complicated commercial cases, and companies that are targets of frequent litigation face ever-increasing costs. Under FRCP rules, the party from whom discovery is sought has the right to resist discovery if retrieving the information poses an undue burden or excessive cost. The information has to be “reasonably accessible,” though the FRCP doesn’t define what that means. Generally, electronic information that’s stored in readily usable formats is considered “reasonably accessible.”

Many people don’t realize that their personal property is not beyond the reach of opposing parties in lawsuits, but if home computers, PDAs, flash drives, data phones and other devices are used for business purposes, the information they contain can be subject to discovery, as well. That doesn’t mean that everyone who works from home or sends e-mails from their home laptop has to turn over their computer if litigation is started, Centner pointed out, but it certainly makes that piece of equipment subject to be called into question because it could have relevant information on it.

How does a company determine what information should be stored and what information should be destroyed after a set period of time?

“There is certainly no obligation that everything be kept for all time,” Centner observed. “There are certain records, such as tax return records, that need to be kept pursuant to certain statutes. I think every business has to look at it independently, put a data retention and data destruction policy in place, and then follow it.”

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