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Keeping your head in the sand about (ESI) can create a billion dollar headache.


The recent revisions to the Federal Rules of Civil Procedure (FRCP) have made the discovery of electronically stored information (ESI) the second most important aspect of a lawsuit (next to the trial itself). But what does and, more importantly, what does not, qualify as ESI. The new rules do not specifically define ESI.

Rule 34 now states that requests for ESI include writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations from which information can be obtained. The Committee Note to revised Rule 34 state that the breadth of this definition is designed to anticipate future technological advancements which might fall outside a more narrow definition. Rule 34 also allows for inspection, copying, testing and sampling of ESI. ESI includes information stored not only on computers, but on external hard drives, back-up tapes, CDs, DVDs, jump drives, PDAs, cell phones, online databases as well as hundreds of other information storage devices,

So, ESI covers everything everywhere. Right? Well, although the FRCP define ESI broadly, parties need not produce all ESI responsive to one or more discovery requests. Rules 26(b) (discovery scope and limits), 26(c) (protective orders) and 34(b) (procedure) limit the scope of discovery of ESI, just as they do with hard copy documents. Even with these limitations, however, the resulting amount of ESI which a party must produce in a lawsuit will still be one thousand or more times the number of documents that would ordinarily be discoverable in hard copy form.

So what? What does this mean to the average business? Well, courts holding businesses accountable for finding and producing all of the discoverable ESI requested by the other party. What if a business cannot find the requested ESI? What if the company inadvertently deleted the ESI? Even before the most recent change to the FRCP, juries have been dealing out harsh damage awards and courts have been levying draconian fines against companies accused of deleting ESI.

In Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 312 (S.D.N.Y. 2003), a routine employment discrimination case turned into one of the largest damage awards ever handed down, when the plaintiff proved the defendant had not produced all of the emails requested in discovery. The defendant’s failure to find and produce the requested emails led the judge to order an adverse instruction to the jury, resulting in a $29.2 million damage award.

In U.S. v. Philip Morris USA Inc, (D.D.C. 2004) the court sanctioned Philip Morris to the tune of $2.75 million after Philip Morris continued to delete email which was the subject of outstanding discovery request.

In Coleman v. Morgan Stanley & Co., Inc., 2005 WL 674885 (Fla. Cir. Ct.) the defendant’s failure to disclose the existence of over 1,000 back-up tapes led to the court issuing an adverse instruction to the jury, resulting in a $1.45 billion award.

How do you avoid a billion dollar ESI headache? Implement a document retention/destruction/hold policy. An appropriately implemented policy allows a company to take advantage of the Safe Harbor provisions of the new rules. These Safe Harbor provisions insulate a company against sanctions for documents destroyed in good faith. They key is to contact your lawyer and implement a freeze on document destruction at the first hint a lawsuit is brewing against your company. Otherwise, it may not be YOUR company for long.

Brett Trout

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