When Philip Morris was sued, the judge considered the inadvertent deletion of e-mail as if it were purposeful destruction of evidence.
In a case involving Morgan Stanley, the company did not have a central repository for e-mails, and didn’t know where records were stored.
These storage problems — combined with updated federal civil litigation rules — are causing businesses more headaches and increasing the costs of complying with legal discovery rules and electronic records storage regulations.
The federal civil litigation rules mandate a conference between parties to discuss ways to deal with archived data. After the documentation needs are presented, a business is expected to disclose what information is available and where it is stored, how the files can be accessed and why any relevant data might be missing.
The rules require companies to store electronic records — including e-mails — in the event of a lawsuit. An IT technician who re-uses a back-up tape could be guilty of “virtual shredding” under the law, according to legal analysts.
Businesses must have a detailed inventory of their data assets, systems, retention policies and back-up strategies.
But the rules don’t say what should be saved — or for how long. And that leaves businesses like Morgan Stanley and Philip Morris in the lurch.
E-compliance firms are a thriving industry, and are expected to grow 30 percent annually during the next three years. One survey estimates that industry revenue will equal $2.7 billion by the end of 2007.
Despite problems with lost e-mails or lack of record back-up and storage, it’s increasingly difficult to hide information, said Mike Goess, the John J. Sullivan professor of free enterprise and chairman of the division of business in graduate programs at Regis University.
E-mails are archived in several places, and employees increasingly keep copies.
“If they even theoretically have been deleted, many times, those documents can be recovered,” he said. “The process has increased the cost of lawsuits substantially. Fully complying with discovery can require an awful lot of digging.”
But that information could be needed to save the company from lawsuits — as well as in a discovery process.
A survey of 840 companies by the ePolicy Institute and the American Management Association found that one of every five organizations has received subpoenas for employee e-mail or used e-mail to defend the company against allegations of sexual, racial or other discrimination claims.
And that’s why many companies are making sure their documentation is saved before they get sued.
The majority of the money for electronic legal discovery goes to attorneys, law firms and outsourced providers, Goess said. As more companies rely on electronic records, law firms stack up more billable hours sorting through them. But more companies are coming up with solutions, he said.
“Even as companies are getting better at doing it — and not all of them are — it’s still expensive,” he said. “Companies are not required under the civil rules to keep everything, and the attorneys have to keep what they’re looking for specific. But there could be volumes of information to slog through.”
For smaller companies, the problem can seem overwhelming. Locally, few small business owners bother with archiving e-mails, said Trevor Dierdorff, owner of Amnet Computer Services.
“We’re recommending it, especially with the changes in federal law,” he said. “We have a product that will both archive the e-mails and make them searchable, but it doesn’t seem to be catching on very quickly.”
The product, called Exclaimer, is one way small companies can comply with the federal rules, he said.
“People just don’t seem aware that they are required to do this,” Dierdorff said. “We always install a back-up product for the rest of the electronic files — but few people want to archive old e-mails.”