Avoid Getting Mega-Bitten by Mega-Bytes

When IBM introduced RAMAC, the world’s first electronic storage device some fifty years ago, few realized the genie that IBM released from the bottle. The RAMAC—a contraption weighing tons and consisting of multiple refrigerator-sized boxes—had a five megabyte (MB) capacity. Today, storage 200 times the amount of RAMAC can be obtained from a device the size of a pack of gum. Electronic storage may be inexpensive when compared to its hardcopy cousins, but deceptively so. When faced with litigation, "inexpensive" storage must be searched for relevant evidence. The volume can be staggering: a typical 40 MB hard drive translates into almost four million pages of e-mail or 600,000 images. When companies aggregate electronic storage from servers, hard drives, and back-up tapes, they can easily have accumulated terabytes of information—or billions of pages of information.

Managing electronically stored information (ESI) is a huge corporate issue. While the topic is not new, interest has intensified because of the Supreme Court’s December 1 changes to the Federal Rules of Civil Procedure with respect to electronic discovery. While the amended rules largely codify what lower courts had been doing, for the first time those rules specifically address ESI.

For non-lawyers, the specific disclosure scheme under the amended rules is not a primary concern. It is enough to know that the amended rules require the disclosure of ESI and require the parties to develop an ESI discovery plan early in the case. More important to the layperson are the bedrock questions of "Who pays for ESI?" and "What happens if ESI is deleted?"

Who Pays?

Locating and producing ESI can be costly. The amended rules require a party to produce relevant information that is "reasonably accessible," and the assumption is that the producing party will pay for that production. "Accessible" files—the e-mails in the inbox and the spreadsheet on the hard drive—are similar to the traditional paper documents that are stored in a party's file cabinet. Accessible documents are visible in a file listing, are “active” (i.e., they can be used without special forensic "messaging”". However, much of the ESI that rests on a computer is not so easily found, opened or used; it requires forensic efforts to locate and process the data to make it usable. Under the amended rules, a court may either shift the cost of producing this “inaccessible data” to the requesting party or it may shield the information from production altogether.

Deleted ESI

Even before ESI entered the picture, parties had a duty to preserve evidence related to pending or threatened litigation. The nature of ESI makes complying with this duty more difficult. Sure, ESI can be destroyed by the electronic equivalent of running an electronic file through the "shredder," but a person can also inadvertently destroy relevant ESI simply by turning on a computer or creating a new document. The amended rules recognize this key difference with ESI and provide a new "safe harbor" rule that shields a party from penalty for the destruction of ESI due to the "routine, good-faith operation of an electronic information system." These new protections are probably of limited value because they do not override a party’s obligation to preserve all evidence related to threatened or pending litigation.

Help!

How should companies navigate the waters of ESI? Consider these three suggestions:

1. Do not create it. If ESI never exists, it cannot be produced. Instill a company culture that does not use the phrase, "just an e-mail."
   
   
2. If you create it, get rid of it . . . if you can. The first suggestion will have limited practical effect. But there is no reason that a company cannot, after an appropriate period of time, dispose of unnecessary ESI. Every company should have a document retention policy that also requires the orderly disposal of information. And, when a company enacts a retention policy, it needs to follow it! But remember, some types of information must be preserved by law whether because of a statute such as Sarbanes-Oxley or, as noted above, the duty to preserve evidence for litigation.
   
   
3. Be sure to talk. Management, legal and information systems form the three legs of the electronic discovery stool. All three legs must communicate to make sure that ESI is properly created, stored, destroyed, and when necessary, produced for an opponent. Corporate balkanization is a recipe for disaster.

Navigating the world of ESI certainly is manageable, but it will take planning and effort to do so. So start now, before litigation begins . . . or bring the Remington typewriters out of storage.

About the Author

Kurt Dykstra is a partner in the Holland, Michigan law offices of Warner Norcross & Judd, LLP, where he concentrates his practice in commercial litigation and trade secret law. He is also an instructor of Business Law at Hope College. Kurt can be reached at kdykstra@wnj.com.