E-Discovery: The Long Arm Of The Law

Businesses that invest in procedures to manage and discover their electronic data will find themselves better prepared legally and financially if faced with litigation.

That's the message from a pair of attorneys who on Tuesday discussed the importance of electronic discovery, or e-discovery, at Nth Generation Computing's annual Summer Technical Symposium.

The three-day Symposium, held this week in Anaheim, Calif., is the eighth annual end-user conference for Nth, a San Diego-based solution provider.

E-discovery is the preservation and production of electronically stored information typically during the discovery phase of litigation, said Liane Komagome, principal and director of electronic discovery and legal business consulting at CRA International, a Boston-based legal and financial consulting company.

Most large businesses will face litigation sooner or later, said Daniel Garrie, attorney and partner at CRA International. He cited studies done by research firm Gartner, which found that nearly 90 percent of U.S. companies with revenue exceeding $1 billion are facing an average of 147 lawsuits at any given time, and that the average cost to defend a corporate lawsuit exceeds $1.5 million per case.

The base on which e-discovery is built is records management, Garrie said. Electronic records in principle are not so different from traditional paper records in that they must be managed according to rules such as those laid down by HIPAA for the medical space, he said.

Policies for retaining electronic records should also be the same for paper records, as any records management process should depend not on the media on which records are stored but instead on the content of the records, Komagome said.

Komagome compared records management to using a sword. "With a sharp and#91;managementand#93; program, you will find that all the other parts of the and#91;e-discoveryand#93; process easy to stick to," she said.

Assuming records are managed properly, the first step when facing litigation is to identify the relevant records, preserve them so they cannot be altered, and collect them for further study.

The primary difficulty at this stage is preserving data that may be live and in use by the business, Komagome said. "How do you handle it when a lawyer comes in and says, 'Preserve,' " he said. "What? Preserve. This is not just handing them a backup tape."

Once records have been collected for litigation, they go through processing, review and analysis phases. The processing of the data in order to weed out irrelevant data is where lawyers make a lot of money, Garrie said. For example, he said, the typical company might find that only 10 percent of its data is really useful. "So if it costs $1 million to process it, out of that, $100,000 is actually useful to your company," he said. "That's crazy."

And that's why records management systems are so important, Komagome said. "If you have aggressive records management, you get rid of a lot of crap. . . . You keep only the useful information," she said.

Reviewing the records is even more expensive, accounting for about 70 percent of the e-discovery process. "So the more information you give a lawyer that is irrelevant, the more it costs," Garrie said. "Don't forget. Lawyers may be charging $500 per hour, reading an average of 80 documents an hour. Do the math."

Electronic records to be turned over to opposing attorneys as part of the discovery process should be in their original electronic format, Komagome said. For companies that have to pull the data out of older systems, a lawyer's first question will be to ask whether the data was stored before litigation started, she said. If yes, the data has to be provided during the discovery process regardless of the technology.

In cases where the hardware or software that was used as part of the data creation process are available from other places, a company with relevant data stored in such older systems still have to make accommodations to provide it in a readable format, Komagome said. "And if it's so old that it's not possible to find the appropriate technology, then why didn't you dispose of this data," she said.

Next: Knowing When to Hold It, When To Throw It

One of the biggest problems companies have is that they save too much data, which increases the cost of not only e-discovery but storage in general.

While some companies think saving everything is a way to protect themselves, it is almost never true, Komagome said. "If you save everything forever, I hate that," she said. "Think of the storage required. Most of it is not useful information. Retention is difficult. And if you need to look for something, it's difficult."

In addition, by falling short in terms of knowing when to dispose of unneeded data, especially the huge amount of data that is not related to running the business, companies put themselves at greater risk, Komagome said. "When you have a narrow window when there is no litigation, purge everything that's not related to your business," she said.

New communication and information storage technologies are making it increasingly difficult to manage and retain and dispose of information, Garrie and Komagome said. They cited the increasing use of not only cell phones, VoIP and text messaging, but also such technologies as iPods and even Xbox and Wii gaming systems as places where users can store both personal and business data.

Those varied storage devices all have to be taken into consideration when doing records management and e-discovery, especially since a company can be held liable for an employee's content, Garrie said. "For example, in the case of pedophiles, if an employee makes a comment on another employee's daughter, even if it's stored at home, the company is liable," he said.

Further complicating e-discovery are changes in how people communicate. For instance, voice mail and VoIP are not easily searchable, Garrie said.

Another example is how instant messaging and text messaging are changing communications, Komagome said. "So many people are used to texting that it's leading to interesting grammar and symbols," she said. "And it's easy to hit the wrong button and send a message to 40,000 people. Also, something that looks humorous today may not seem funny to a judge and jury two years later."

During the presentation, several audience members asked questions related to e-discovery.

When asked whether it is necessary for a business to hire a third-party firm to help with record collection and preservation, Garrie said it is not. "You can do collection and preservation with in-house IT people and counsel," he said. "But having a third party can raise your profile."

When asked what the repercussions might be for missing some piece of needed data, Komagome said companies that document their discovery process are in a much better position with the courts.

Garrie said that the best approach is to use common sense. "If you follow some off-the-cuff plan, and not follow your policy, that's trouble," he said. "But if you do it in good faith, and show you follow the regular procedures, it's safer."

One audience member asked how encryption of electronic records affects e-discovery.

Garrie said it depends on the type of encryption, whether encrypted data was exported, and how the encryption keys are managed. "If the data is encrypted, and you lose the token key, that sucks," he said.

It is necessary to be reasonable in how encryption is used, Komagome said. "If only one damning file is encrypted, you had better be prepared to defend it," she said.

In response to how to handle records in the case of a merger or acquisition, Komagome said that in such cases the first people to leave, whether voluntarily or involuntarily, are IT people from the target company. And that, she said, can become a real problem.

"The acquiring company's first thought is to trash everything not related to the business you bought," she said. "But what about the financial data on a server? I've seen companies where no one dares to turn a server on. They have to rehire the IT people. And they may pay five times the pay to bring back someone who was let go just two weeks ago."

Garrie said it can get worse. "I've seen one company pay someone a quarter-million dollars for one week's worth of work," he said.

Garrie and Komagome were later joined on stage by the Honorable Maureen Duffy-Lewis, a judge at the Los Angeles Superior Court, who said that what happens when businesses get to the courthouse depends on what they do before a lawsuit is filed.

Often, a business will get word of a pending lawsuit, giving them time to sit down and understand what electronic records may be required, Duffy-Lewis said. "All discovery doesn't always lead to relevant trial-admissible evidence," she said.

Some lawyers understand e-discovery, while many others do not, Duffy-Lewis said. "Sometimes, it gets so bad I will retire to my chamber with the lawyers so we can get acquainted with each other and get everyone up to speed," she said.

When a company in good faith believes there may be a lawsuit, it is sometimes better to send a note to the other side to let the two companies' counsels start discussing what needs to be preserved, Duffy-Lewis said. "Your obligation, once you know you are in litigation land, is to start moving to preserve information right away," she said.

It is very important to show that one has checked every possible location where relevant information could have been stored, and that a good faith effort has been made to locate that information, Duffy-Lewis said.

"I try not to get in the way of a litigation," she said. "But I will slap your hand if you get in the way of a litigation."