Blazing an e-paper trail

New electronic discovery rules prompt review of record retention

John R. Bachofner
Bullivant Houser Bailey

Effective Dec. 1, 2006, the Federal Rules of Civil Procedure were amended to place Electronically Stored Information, or ESI, on equal footing with paper discovery, which is information litigants obtain from the other party during a case. As a result, any business that is currently involved in federal litigation, or may become involved in litigation in the future, must immediately take steps to preserve ESI that may be relevant to the litigation.

What is ESI? Simply put, it is any type of electronic data that can be stored. One typical characteristic is high volume. Electronic devices such as computers store information in bytes. Since one gigabyte of data roughly translates into 75,000 pages, the standard 80 gigabyte hard drive on a laptop can contain an enormous volume of ESI. ESI is also dynamic. Unlike paper, ESI can be easily modified by the device that created it. It also can be rendered unreadable without the particular program that created it, even if unintended by the user. Finally, ESI can usually be searched electronically, allowing a much greater amount of information to be processed in a shorter amount of time. However, the sheer volume of ESI, combined with the variety of places it can be found, and the ease with which it can be lost, make electronic discovery a potential nightmare for the average business owner.

Where is ESI stored? The obvious answer includes computers, though the extent to which electronic data has infiltrated business is staggering. ESI is not only contained in the files on a desktop or laptop, but in emails, voice mails, network and email servers, PDA’s, removable drives, back-up tapes and other emergency data storage. If you or your employees work from home, ESI most likely exists on those home computers as well. Then there are the removable media such as flash drives, memory cards, floppy disks, CDs and DVDs. If you have not already done so, document where ESI may be found in your business.

How does it affect me? The obligation to preserve evidence not only arises when a party has notice that it may be relevant to a lawsuit, but even before litigation, when a party reasonably should know that the evidence may be relevant to anticipated litigation. If a lawsuit arises and a court finds that the company had a duty to place a hold on any data storage, retention or destruction practices, then the court may impose monetary or other sanctions for their failure to do so.

What can I do to protect my company? Before litigation is pending, establish and adhere to a reasonable and legally defensible document retention and destruction policy. Assign specific retention schedules to particular types of data, including email, business, accounting and other records. Because different businesses may fall under different regulation guidelines, it is important that you determine the minimum retention requirements for each category of documents in your specific industry. Make certain your employees know your policy and apply it to both electronic and paper records consistently. Once litigation is pending, take immediate steps to preserve ESI that may be relevant to any claim or defense. Consult your attorney and your information technology manager to outline a procedure for retaining relevant information, so you can avoid sanctions for the destruction or material alteration of evidence during litigation.

While the new electronic discovery rules have only recently been implemented in Federal Court, we can expect to see similar changes coming soon to a state court near you. Be proactive. Affirmatively take steps to place a lasso around your company’s ESI before litigation could turn it into a noose.

John R. Bachofner is a shareholder in the Vancouver office of Bullivant, Houser, Bailey, PC, a west coast regional, multi-practice law firm with six offices in four states. Bachofner utilizes technology to enhance his practice of bankruptcy, creditor’s rights, commercial litigation and business law in both Oregon and Washington. He can be reached at 360-906-6340 or john.bachofner@bullivant.com.

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