Litigation in the information age: taking discovery into the digital era to comply with new federal e-discovery requirements.

Abstract

Purpose--The paper aims to discuss the growing importance of electronic discovery in commercial litigation; the impact of the e-discovery amendments to the Federal Rules of Civil Procedure (FRCP), and the steps corporations should take to address the new rules.

Design/methodology/approach--The paper reviews the impact of corporate reliance on electronic information on litigation; regulations that require corporations to protect data; significant cases that established ground rules for discovery of electronic information, including McPeek v. Aschcroft and Zubulake v. Warburg; the requirements of the e-discovery rules that have been included for the first time in the FRCP; and outlines the steps that corporations should take to mitigate corporate e-discovery risks.

Findings--The paper concludes that electronic discovery challenges will continue to grow for corporations as e-discovery becomes increasingly important in commercial litigation; that companies can mitigate their e-discovery risks by proactively working to meet the new requirements; that forward-looking companies can gain important "safe harbor" protection by instituting a reliable litigation hold strategy; and that companies can use the new federal rules as an opportunity to better manage and forecast their legal costs.

Originality/value--The paper provides a general review of significant e-discovery rulings; an explanation of the impact of the amended FRCP on corporations; and practical steps that companies can take to mitigate e-discovery risks.

Keywords Litigation, Electronic media, Data security

Paper type Technical

Introduction

As electronic information has come to play a dominant role in business, particularly with the rise of the internet since the mid-1990s, corporations have faced a succession of legislative mandates to safeguard certain types of electronic data. Those measures focused initially on consumer privacy and compelled companies to take steps to safeguard personal health, and medical and financial information. Following the accounting scandals early in this decade, the federal government mandated that public companies take measures to ensure the accuracy of their own financial data. Now, the universe of digital information that must be protected and preserved has expanded to include the full spectrum of business communications, from email to spreadsheets and databases, that may later play a role in litigation.

Under the amended Federal Rules of Civil Procedure, companies now have a duty to preserve electronic documents as well as to ensure that those documents can be produced in a timely fashion during discovery. This forces corporations to balance the competing interests of meeting the requirements of the new federal rules, with maintaining the efficiency of, and managing the costs of, their information technology system. The amended rules do not force companies to save every byte of electronic information; they do make it essential to ensure that corporate document retention policies and discovery procedures meet the new electronic discovery standards.

Companies that fail to meet the federal "e-discovery" rules risk not only court sanctions, but also significant adverse judgments. Even before the amended rules took effect late in 2006, judgments totaling more than $1 billion had been levied against corporate defendants that failed to preserve and produce crucial electronic documents during discovery and at trial. Previously, electronic discovery issues had been handled on a case-by-case basis, but the new standards set out general ground rules that must be followed in all federal cases and will be closely followed in the states. Now, corporate counsel will be faced with negotiating the parameters of e-discovery from the start of litigation and attempts by opposing counsel to exploit any shortcomings in a company's document retention and electronic discovery procedures.

Over the longer term, the new rules provide a framework that should help companies to manage the rising costs of e-discovery, but only if they take a proactive approach. For those companies that take a forward-looking view, the e-discovery standards present an opportunity to manage their legal costs more effectively, and to improve the efficiency of their document management procedures in general. Given the ubiquitous nature of litigation and computer technology in commerce, the new rules will have a significant impact on all industries. Every company that becomes embroiled in a lawsuit is likely to face e-discovery issues. This makes it imperative for companies to update their discovery procedures from the paper era and into the digital age.

Technology, regulation and litigation

Almost since the first promise of a paperless office, electronic information has posed special challenges. Companies have struggled with how to manage rapidly increasing volumes of digital data, use it most effectively, store it, manipulate it, and ensure that it is neither lost, stolen, unwittingly modified, or …