Electronic Discovery: What You Need to Know

If you own or manage a company, it is important to understand that the data maintained in your computer system is subject to discovery in a lawsuit or legal action. This article addresses some the issues you should know about to help protect yourself and your company against future liability for not adequately maintaining records of your electronic data.

Example: Let's say everything is going smoothly at your business. Sales are up, your customers are satisfied, and vendors provide you with good rates. You have successfully hired an IT person to set up your computer network and employees e-mail and instant message each other and you about internal operations, customers and vendors. You keep most business documents in electronic form and may even have a back-up system on your network or offsite.

Then, you find your company facing a lawsuit. You are asked to produce all e-mails from one executive to a vendor over a three-year period. Can you do it? How quickly? What if you were asked to produce all instant messages between staff members over a specific time period? What if someone inside your organization panics and deletes incriminating e-mail messages and other electronic documents?

You can see the potential to get into legal hot water with electronic documents. In today's digital era, companies need to be prepared for such requests.

Discovery Basics

In a lawsuit, after the complaint and answer stages, there is a period when each party is entitled to obtain and examine information, documents and pre-trial testimony (depositions) of the other party. The rules involved in this process are strict. Each party must adhere to them, or be subject to sanctions. Lawyers gather evidence by taking testimony from witnesses and examining physical evidence and relevant documents.

Years ago, these documents were likely on paper. But today, they are just as likely to involve spreadsheets and word processing files on computers, along with e-mail messages, attachments, website pages, texts, social media posts and other electronic documents.

E-Discovery

Electronic or e-discovery in litigation deals with the exchange of information in an electronic format. It is often referred to as electronically stored information (ESI). This includes data stored on computers, mobile devices, network, backup systems or other storage media. It also includes metadata.

E-Discovery is necessary to identify and collect evidence that supports each party's position. Usually it entails using keywords to search electronic information within the organization.

Federal Rules of Civil Procedure specifically address electronically stored information (ESI). The rules establish protocols for how each party must produce documents. For example, if the parties are uncooperative and refuse to participate in discovery planning conferences, the rules allow for sanctions. The rules also consider ESI as documents subject to subpoenas.

There may be some safe harbors when electronic evidence is lost and unrecoverable as a matter of regular business processes. However, if data loss does not occur in the normal course of business, the party could be subject to sanctions because of "spoliation."

Spoliation occurs when a party intentionally or negligently withholds, hides, alters, or destroys evidence relevant to the lawsuit. It can lead to fines or incarceration in some jurisdictions. In other cases, missing data could lead to a negative evidentiary inference due to the party's destruction of a document or things that are relevant to an ongoing or reasonably foreseeable civil or criminal proceeding.

Businesses must be in compliance with the retention and management of ESI. Improper management of electronic information can result in a finding of spoliation of evidence and the imposition of one or more sanctions including adverse inference jury instructions, summary judgment, monetary fines, and other sanctions.

Speak with your attorney about what you need to do to make sure you are in compliance with federal and state rules when it comes to electronic discovery. You do not want to find yourself sanctioned by the court because of inadvertent destruction of electronic data.