Businesses — both large and small — are sitting atop a potential time bomb by failing to bring their records management programs into compliance with recent rules governing the discovery of electronically stored information, commonly known as ESI.
That’s the disturbing conclusion reached in two new reports issued by the Institute for the Advancement of the American Legal System at the University of Denver.
“Electronic Discovery: A View from the Front Lines” and “The Emerging Challenge of Electronic Discovery: Strategies for American Businesses” say that blissful ignorance of one’s own technology is no longer an option for any business that is, or may become, involved in litigation. That is because the new rules establish clear mandates for preserving and producing relevant ESI — including audio and video files, text messages, voice mails, databases, digital photos, word processing documents, spreadsheets and especially e-mails — under threat of significant fines and other sanctions in the event of noncompliance.
Even for the small minority of businesses with a clearly defined strategy for managing ESI, the costs of compliance can be enormous.
Consider one estimate that pegs the volume of e-mail to 1 gigabyte per employee per year. Given the complexity of locating, preserving, reviewing and producing e-mail in response to anticipated or pending litigation, it can cost between $5,000 and $7,000 to shepherd a single gigabyte of e-mail through the discovery process.
According to one estimate, even a “midsize” lawsuit involving 500 gigabytes of data may generate between $2.5 million and $3.5 million in e-discovery costs alone.
Not surprisingly, any system that requires litigants to spend their resources on the process, rather than the outcome, is susceptible to abuse. Already, there are reports of “e-extortion,” where the lack of proportionality in discovery forces a party to abandon otherwise meritorious claims or defenses when confronted with the prospect of ever-spiraling costs.
Indeed, the recently released IAALS reports cite one expert as relating that he regularly sees the costs of e-discovery running up to four times the lower estimate of liability and twice the high estimate of liability. Absent a measure of restraint over the amount of e-discovery permitted, these trends ultimately threaten access to the civil justice system itself.
One thing, however, is clear. Regardless of its size, no business can afford to ignore the problem and hope that it will go away. Although the new rules are somewhat murky and difficult to apply, business leaders can — and should — be proactive by taking certain steps now to minimize the disruptions that will invariably accompany litigation in this new operating environment.
First, designate someone within the organization to learn the technology. That person should know how the technology works and should understand both the nature and extent of ESI that is generated and stored on a daily basis. In short, the ESI designee must not only know the terrain of the entire records management landscape — from e-mail to instant messages to handhelds to Blackberries to voice-mail to flash drives to laptops — but must also be able to navigate the terrain quickly and efficiently to control retention and disposal.
Second, establish policies for regular document and ESI retention and disposal. Identify precisely what information will be retained, what information will be deleted, how and how often the disposal will occur and who will be responsible for monitoring employee compliance.
Third, develop a plan of action in the event of a lawsuit. At a minimum, that plan must include a “litigation hold” at the outset of litigation or whenever litigation is reasonably anticipated; and the “litigation hold” must override the regular document and ESI retention policy so as to allow ready identification and preservation of all potentially relevant data.
Litigation is an unfortunate, but inevitable, fact of business life. However, advance planning to design and manage records retention systems can help businesses meet and beat this new ESI discovery challenge.
Copies of the complete IAALS reports are available at www.du.edu.legalinstitute/.
William W. Maywhort is a partner at Holland & Hart LLP. He can be reached at firstname.lastname@example.org.