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Avoid exposing yourself in federal court

Q. Why should you care about the changes to the Federal Rules of Civil Procedure (FRCP) relating to electronically stored information (ESI)?

A. You do not want to get caught with your pants down.

In the event you are ever sued, proper ESI management immediately sets the tone for any federal lawsuit. FRCP 26(f)(3) mandates that the parties to a federal lawsuit meet “at least 21 days before any scheduling conference”. Consider the in terrorem effect of the other side pushing eight well indexed DVDs and an electronic privilege log across the table and demanding the same from you.

Being unprepared for electronic discovery not only exposes your greatest vulnerability, but you still have to scramble months of activity into a matter of weeks just to play catch-up. Failure to have an ESI management system in place before you get sued will cost you dearly. Not only will you get carpal tunnel from writing checks, but your IT staff will be MIA for weeks or months tracking down and indexing information you should had had at your fingertips.

In addition to running the risk of overproducing confidential documents in the rush, there is an even greater risk of underproduction. Underproducing relevant documents often leads to additional costs, monetary sanctions, adverse rulings from the judge and, potentially, the loss of one or more of your lawsuit claims or defenses.

Within mere weeks of the lawsuit being filed, your own attorneys are going to demand from you a list of:
1) All of the ESI you have that may be relevant to the lawsuit;
2) The type of hardware storing the ESI;
3) The type of software needed to read the ESI;
4) What portions of the ESI are privileged or confidential; and
5) All ESI which may be inaccessible due retrieval issues.

On the upside, your attorneys will be available, at $300-$600/hr, to assist you at doing what your IT department and other staff could have done at $60-$100/hr. Even worse, your attorneys may become disgruntled at having to do the data processing you failed to do. Myself, I will mow lawns and shovel snow for $500/hr, but some attorneys do not see it that way. In addition to irritating your attorneys, poor ESI management will inevitably irritate the opposing party (raising your costs as a result of more hearings), the judge and, eventually, the jury. Poor ESI management leaves everyone thinking you are lazy, stupid or dishonest. As you might imagine, none are desirable points for your jury to deliberate.

From the moment you anticipate a lawsuit, the law requires that you place a “hold” on the destruction of all relevant ESI. A proper ESI management system, with a strict retention/destruction process may destroy “smoking guns” you otherwise would have to produce to the other side. Without a proper ESI management system, and the ability to place a “hold” on the destruction of relevant ESI, you may end up accidentally destroying potentially helpful ESI like metadata. Even worse, in the event you accidentally destroy helpful ESI, the court might very well instruct the jury that they are to assume the ESI destroyed was actually damaging to you.

Having a proper ESI management system in place not only assists you in a lawsuit, but streamlines your business as well. Moreover, having exculpatory ESI at your fingertips significantly increases the odds that you might head off a lawsuit altogether. Proper ESI management allows you to produce a wealth of information to the other side before they even sue. The depth, breadth, organization and content of properly managed ESI can go a long way in convincing another company they do not want to get into an ESI tangle with you.

Conversely, the inability to access ESI may convince the other side to sue you when they might otherwise have walked away. A potential plaintiff utilizing state of the art ESI management may see an adversary much more likely to settle on favorable terms once the adversary’s dark ages ESI management system implodes under the pressure of the new FRCP.

Brett Trout

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