Federal and state Rules of Civil Procedure govern who gets to examine all those e-mails. Some lawyers say even more rules are needed.
In the increasingly wide-open, unwired world of e-mail, text messaging, social networking, smartphones and cloud computing, there's hardly a legal dispute that doesn't involve some form of electronic information. When the U.S. Supreme Court approved e-discovery amendments to the Federal Rules of Civil Procedure in December 2006, attorneys handling federal cases hoped the new regs would be a clear guide to the responsibilities of plaintiffs and defendants. In July 2008, the Ohio Supreme Court adopted similar amendments to the Ohio Rules of Civil Procedure, governing litigation in state courts.
Indeed the new rules are having a major impact on how businesses handle their electronic data. "If you have a piece of litigation, you're subject to the electronic discovery rules," says attorney Traci McGuire, a director with Kegler, Brown, Hill & Ritter. "It makes you sit up and take notice at the outset. You have to be on the same page as your client. You have to be sure that your client is aware of the obligation to preserve documents."
The rules establish processes for managing e-discovery, require parties to agree on protocol before the discovery process begins, authorize procedures for how documents are produced, protect litigants against sanctions for destroying records in the normal course of business operations, clarify rules for subpoenas and standardize discovery agreements.
Marc Blubaugh, a partner with Benesch, Friedlander, Coplan & Aronoff, says the rules "did give some further predictability. They did take a step in that direction and did flesh out some other important obligations and began to set the foundation for parties' obligations in the e-discovery era."
"There is a new appreciation for the permanence of information," says McGuire. "When you do e-discovery of inboxes, you can get messages from the inbox, sent messages, drafts, read receipts, pretty much any way you can manipulate it, that info is still there. Companies that have been involved in the actual discovery process see the scrutiny, and that's when they begin to realize that nothing goes away. Not only is this e-mail from Suzy to Sam being produced, here is all the information about it: time sent, read receipt attached to it, three drafts of it before it was actually sent."
"It seems like the last few years with the advent of e-discovery, everybody has become sensitized to the need to preserve electronic data," says Dan Cvetanovich, head of the litigation practice group for Bailey Cavalieri.
"People are more sensitive than ever to the duty to preserve because preservation has become harder with needing to preserve electronically stored information, which is a lot more challenging than preserving paper files," says Tiffany Miller, also an attorney at Bailey Cavalieri.
"As the cost of storage has gone down and as hard drives and memories become cheaper, more data has been stored," says Greg Krabacher, chair of Bricker & Eckler's e-discovery and compliance group. "That's really a big driver for the volume of e-discovery.
"Within our firm, and even before those rules were formally implemented, we started looking at how we were conducting the initial phase of litigation," Krabacher says. "By the time the rules were amended, we had instituted a more formal means by which we advise our clients in safeguarding evidence."
This new emphasis on record preservation and e-discovery procedures has come at considerable cost. Information technology expenses and attorneys' fees have escalated, right along with the volume of materials demanded by litigants. In some cases, lawyers for one side have been able to bludgeon the other side into a settlement, just by making onerous discovery demands.
On balance, most attorneys seem to agree the new rules have done more good than harm. But some say it's time to take another look at e-discovery, with an eye toward filling in the blanks and controlling the costs.
Attorneys advise clients to be proactive in preparing for electronic discovery. "If they look at record retention policies and upgrade those now, when they do have a dispute down the line, life will be better," Cvetanovich says.
"Some businesses, just due to the nature of their business, are involved in litigation all the time," Miller says. "We know there are many large businesses that are very proactive. They've got a system in place, they're organized, and they know the rules and what they're supposed to do."
Other companies, unfortunately, give little thought to how they're storing their data. To prepare for e-discovery, a business must first know what electronic systems and software it's using, what backup data exists, where it's stored and who is controlling it.
"Any organization can see some value in just getting their in-house IT in order. It makes sense to map out data and to know where things are," Krabacher says.
"The first step is to get organized," advises Andrew Drake, Nationwide's assistant general counsel responsible for discovery management. "For folks doing it ad hoc, it's a fire drill--an expensive one."
Drake says the fundamentals include a strong working relationship with the IT department and understanding where information is stored, particularly information that might be relevant to a case.
The next step may be installing a formal retention policy--or reviewing one that's already in place. By systematically removing unneeded records on a prescribed schedule, companies become more organized. When litigation arises, there will be no need to waste time and money sifting through unnecessary information.
"You have to have a proactive stance, and part of that is making sure you have a repeatable and defensible process throughout the discovery process," says Drake.
Communicating with staff, from the chief information officer to the receptionist, also is important. "Advise everyone in the organization that there is no expectation of privacy if you're creating something on a company computer or phone," McGuire says. "If you're sitting at your desk and making a post [to a Facebook page], depending on the case, that type of information is discoverable, as is anything else created on a company-owned electronic device."
Make sure to get buy-in from the information experts. "In the past, there has been a belief that the IT people do their thing and most of us who don't understand the language that they speak don't care much as long as the computers are working," McGuire says. "There is a greater need for all of us to understand how it all works. I think technology people have to be at the table for many of the major decision-making processes on how the information is retained. They're who you will turn to if you need something or to find out why something doesn't exist anymore."
Kim Shumate, associate general counsel at Ohio State University, says a collaborative effort is necessary to prepare for e-discovery. "At the university, we have more than 200 individual computer systems," Shumate says. "We have set up a committee on campus that focuses on e-discovery issues. We work with the chief information officer. We have a group of people who are trained in and working on e-discovery from a litigation perspective for every case."
"When a case comes in, you have to act swiftly to preserve information," Krabacher says. "The initial days and weeks are the most chaotic. You're still evaluating the merits of the case. If you have a game plan in advance, that can mitigate the confusion. Make sure you do those best practices, should your preservation methods be challenged later. You can save quite a bit of money in attorneys' fees because the dispute ends much quicker when you do what is required to preserve what's needed."
The first attorney-client conversation should be about the duty to preserve and the sanctions clients could face if they don't fulfill that obligation, Miller says. "Often that initial conversation rolls into a second conversation with IT personnel. We take it upon ourselves to communicate with IT people and try to understand what they have and where it is. The next step is figuring out how do we physically preserve this data in a forensically sound way, and how can we do it in a cost-effective way?"
Once your side has everything in order, it's time to meet with the opposing party. "You talk with the opposite side to figure out what information they're interested in, the mechanism you will go through to acquire the information and assess information from the other side," Drake says.
Discussion can get extremely detailed, even down to selecting specific search words. Overly broad information requests can yield overly large--and expensive--results. "Force them to be very specific with requests," advises McGuire, who usually represents defendants. "Luckily, most default rules ask them to identify key words that can then be searchable, so that if you're looking through all communications in a year, you're not getting things that are irrelevant."
Even searches using keywords can yield a great deal of information. McGuire notes that in a recent federal case, very particular search terms produced more than 3,000 documents.
Sometimes discovery terms themselves must be litigated. "Not every attorney in town is fully accepting of the notion of what these rules and case laws on preservation and e-discovery mean," Miller says.
A federal court case both Miller and Cvetanovich worked on in Toledo involved very demanding opposing counsel. "They were very insistent that they should be able to bring in their own computer forensic experts and be given the opportunity to do their own searching," Cvetanovich says. "We were able to make the court understand, ultimately, that they shouldn't be able to do it." Instead, "We talked with the other side about what we had, where it was maintained, how it was maintained and how it would be searched. We agreed on the search terms that would be used."
Electronic discovery is expensive. "The financial impact occurs on a couple of levels: the costs borne during litigation and the cost to clean up afterward," Drake says. "In the wake of litigation you start saying, ‘OK, do we need to do something differently or do we need to put more resources behind what we're doing today?' " Drake says. "Nationwide has been good about investing in platforms and technology. ... You just try to make smart decisions, make business analysis and figure out where the best risk mitigation is, based on litigation experience."
Collecting, processing and reviewing electronic information can be costly. Companies may have to hire additional staff or move employees around to work on e-discovery matters while putting their day-to-day responsibilities on the back burner. "The time commitment can be very significant. Most businesses don't exist for the purpose of litigation. They exist to build widgets, or whatever they do," Cvetanovich says. "When, all of a sudden, they have a big load of obligations dumped on them, there's a personnel cost because you have to commit people to doing the things lawyers are asking them to do."
"I think that everyone who has to deal with it has to deal with some level of significant expense, whether it's software or manpower," OSU's Shumate says. "Probably the most costly alternative is if you have a case and you don't have any advance prep done and you are relying solely on outside counsel to create and manage an e-discovery solution."
In some cases, the financial obligations can become so burdensome that they play a major role in the outcome of a case. According to a 2008 survey by the American College of Trial Lawyers (ACTL) and the Institute for the Advancement of the American Legal System, 83 percent of attorneys reported that costs, rather than the merits of a case, were often the deciding factor in settling cases. Sixty-eight percent of ACTL fellows said some civil cases are not filed due to projected litigation costs.
"I represented a company that was accused of raiding a competitor to get the competitor's business secrets," says Blubaugh. The plaintiff claimed Blubaugh's client had stolen flash drives, laptops and other equipment. "My client couldn't have cared less about their business secrets. But the forensic computer work that needed to be performed cost a fortune, so at the end of the day my client opted to settle the case."
Blubaugh says his client had spent more than $250,000 on e-discovery before settling the case for $60,000. "It was a situation where the e-discovery was being used as a sword against a business and, sadly, an effective one," he says. "At the end of the day, the client had to make a business decision, despite that we felt that the merits of the case were strongly on our side."
Krabacher, who has seen an uptick in similar cases, advises firms not to back down if they believe the merits are on their side. "It's clear that people are trying to win cases strictly on discovery and on trying to make it expensive," he says. "Our response is to fight that and beat it back, then to countersue for the attorney fees."
Updating the Rules
The Seventh Annual Litigation Trends Survey Report, released in 2010 by Fulbright & Jaworski, an international law firm based in Texas, found 28 percent of responding lawyers expect significant increases in spending on e-discovery, while 68 percent believe the duty to preserve electronic records needs clarification. A whopping 79 percent favor modifying the Federal Rules of Civil Procedure to limit e-discovery in civil actions.
"The current rules still create a lot of anxiety," says Blubaugh. "They simply don't provide sufficient clarity. We need to know with more specificity where these obligations begin and end and what kinds of penalties are associated with not complying."
The E-Discovery Panel of the 2010 Conference on Civil Litigation proposed a number of revisions to the federal rules:Specify a trigger, a point in time when the obligation to preserve kicks in. Specify the scope of the duty to preserve, including subject matter, relevant time frame, types of data, sources on which data is stored or found, form in which data should be preserved and other factors. Specify how long information or tangible things should be preserved. Specify whether the duty to preserve extends to information generated after the duty has accrued. Provide that if an organization prepares and distributes a litigation hold notice, that is evidence of due care. Specify whether, and to what extent, actions taken for the preservation duty are protected by work product or privilege. Set forth the consequences of failing to fulfill the obligations mandated. Provide access to a judicial officer to resolve disputes, apply the rules, consider the potential for cost allocation and impose sanctions.
While the proposal has prompted discussion at both the state and federal levels, any revision is at least two years off, Krabacher says: "Sometimes you have to be careful what you wish for. Clear guidance that is egregious is no more helpful than uncertainty. If it requires too much preservation, it could become tremendously expensive."
Michelle Davey is an editorial assistant for Columbus C.E.O.
Reprinted from the March 2011 issue of Columbus C.E.O. Copyright © Columbus C.E.O.