The business practicality of electronic discovery.

When technology entrepreneurs envisioned the paperless office decades ago, the picture was a dream environment where electronic documents and records were easily produced, distributed, and retrieved. As paperless systems proliferate, the dream often becomes a nightmare for general counsel preparing their companies for the electronic discovery phase of litigation.

Electronic information is playing an important role in self-defense and for regulatory proceedings. Out of necessity, general counsel are moving closer to front and center in the balancing act between productive paperless business practices and precautionary legal measures, finding themselves faced not only with their companies' legal issues but also complex technology issues.

In the paper-based world, creating, storing, and retrieving documents is generally a straightforward and logical process. With the ubiquitous use of technology in the workplace, the trail is not as easy to understand, much less to follow. To prepare a company for imminent or future litigation, general counsel must dive head-long into corporate technology to gain a thorough understanding of how it works and must actively guide the company in developing and monitoring policies and procedures for document preservation and retrieval.

The framework directing pre-trial discovery has existed long before the electronic age. The rules, with some modifications over the years, expressly incorporate electronic files, documents, and data and have proven elastic enough to accommodate most situations. With this in mind, there still are special considerations for electronic documents and records that must be taken into consideration both to support a company's litigation defense and to minimize unnecessary or inadvertent risks during discovery. Data preservation, records management, scope of discovery, production, use of experts, cost allocation, spoliation, and sanctions typify the basic aspects of the electronic discovery process and help provide a guide for developing constructive corporate policies and procedures for electronic data issues.

Preservation of Data

Data preservation has become such a pressing issue that the US Congress appropriated $100 million to the Library of Congress in 2001 to recommend strategies for the long-term preservation of electronic information. The topic also has become a growing concern over the past few years for the information management industry as it drives initiatives in response to federal case law and federal statutory and regulatory developments.

Until standards for preserving electronic data are established, however, each company is on its own to devise suitable preservation methods and policies. There are two ways to approach data preservation. One is a short-term need to preserve relevant, responsive electronic data when a lawsuit is anticipated or filed. The other is a long-term strategy for retaining, retrieving, and destroying electronic data in the ever-present face of future litigation.

An immediate need to preserve electronic documents and records begins once a lawsuit is threatened or filed and overrides the company's existing data management policies. All reasonable steps should be taken to protect relevant information in authentic and reliable forms to eliminate, or at least reduce, the chances of spoliation. In William T. Thompson Co. v. General Nutrition Corp., (1) GNC continued working under its standard document destruction policy despite the existence of a protective order requiring the retention and preservation of documents. The relevant documents that were destroyed, including computer records, could not be reconstructed or replicated, nor were they available from other sources. Accordingly, the court entered default against the defendant for a bad faith destruction of records subject to discovery.

Further, it is imperative that a preservation directive be disseminated to all those likely to have relevant evidence and that the automatic or planned destruction of documents be immediately stopped. The court noted in In re The Prudential Insurance Co. of America Sales Practice Litigation (2) that, despite the fact that the documents at issue were not destroyed in willful violation of the discovery process, persistent and recurrent destruction of documents merited sanctions against Prudential. Although Prudential had a document retention policy, it was inadequately circulated, and Prudential had failed to disseminate the court order requiring document preservation to its employees and field offices. The court stated that, because the policy lacked uniform guidelines regarding the documents to preserve, employees destroyed documents on at least four occasions after the court had ordered preservation. Accordingly, the court ordered Prudential to take certain specific steps to halt the document destruction and fined Prudential $1 million. The amount of the fine reflected the gravity of the repeated incidents as well as the financial worth of Prudential and the minimal financial impact the fine would have on its financial stability.

It is also crucial to stop the reuse of backup tapes once the duty of preservation begins. In Linnen v. A.H. Robins Co., Inc., (3) the plaintiffs alleged the defendant had permitted email to be deleted despite clear notice that such emails were the subject of discovery requests. Although the defendant maintained that it had produced all relevant email, the plaintiff …