Corporate Legal Times

Volume 7, Number 70

Copyright 1997 by Corporate Legal Times Corporation

September, 1997

ELECTRONIC DISCOVERY COSTS ARE LEVERAGING SETTLEMENTS

Bruce Rubenstein

OLIVER NORTH is a hero to some and a traitor to others, but to electronic evidence consultants he is simply a poster boy for their prize horror story. An assiduous shredder of paper documents, North apparently was ignorant of the first rule of electronic evidence:  It isn't gone just because you deleted it. Investigators unearthed deleted communications between North and several Reagan administration officials who later became the focus of investigations because of those documents.

Iran-Contra occurred in the dark ages in respect to electronic advances, but many corporations still haven't integrated state of the art techniques into their management of electronic information.  Meanwhile, electronic evidence discovery consulting is a booming industry that is branching into advising corporate law departments on document management.  Some law firms have also taken up the challenge.

Arthur T. Anderson, a partner at Snell & Wilmer's Phoenix office, says:  "We deal with corporate management of electronic media as part of our responsibilities as discovery counsel, and also as advisors on record-retention policy.  We hook record-retention clients up with attorneys in various specialties because of specific rules and regulations that might apply.  Our tax people can tell them how long to keep certain kinds of tax information, for example, and in litigation there is a common law that has developed with respect to when a company needs to preserve documents because it is deemed to be on notice of a litigation claim."

According to Anderson, many corporations have yet to include electronic media in their record retention program.  "Conceptually, there is no difference between paper and electronic documents," he says.

"The same statutory and regulatory requirements drive both, along with an individual company's business needs.  So including electronic information in a comprehensive program is step one.  Once that is accomplished, we help them develop strategies to locate and produce electronic information in response to discovery."

How long should you keep information?  "There is no set time," says Anderson.  "The Federal Paperwork Reduction Act asserts three years as a kind of ground-level presumption.  If the feds want documents retained longer than that they have to demonstrate why, so three years is something of a floor.  E- mails are often gotten rid of much more frequently, of course."

Electronic Evidence Discovery, Seattle, is one of several businesses servicing clients in computer-related litigation.

"At any given moment we are consulting on about 200 separate litigations," says John Jessen, president.  "We have staff attorneys who work with plaintiffs to develop a discovery strategy.  We get involved in framing early depositions, for example, to find out about a defendant's computer system, whether they have e-mail, how they back up their information, questions like that.  Then we watch the responses, and if we don't see the volume or type of data coming back that we expect, we prepare an affidavit asking for access to their system."

Electronic Evidence Discovery has a library of almost 1 million computer programs collected over the past nine years, so the chances are it has the software to look at any data it gets.  The tools include automated search engines developed by its own technicians that speed up handling the 10 million to 20 million files per week that the company processes.  It also has proprietary software programs that allow it to do things that aren't normally possible.

"For example," says Jessen, "everybody says you can't undelete from the new  [Windows] NT operating system, but we've developed an NT undelete."  There is no way short of physically destroying a hard drive to delete information from it, Jessen claims.

The discovery costs of litigation have skyrocketed with the advent of electronic information storage.  Litigants routinely run up bills of $100,000 identifying, locating, and copying computerized data, and seven-figure price tags are not unheard of.  Most judges view computer files as no different than paper, and force defendants to collect discoverable information at their expense.

The simple threat of forcing a corporation to review thousands of files or backup tapes has become what Jessen calls "an incredible bargaining chip."  In his opinion it has leveraged countless settlements in the last decade.

The corporate services division is the fastest growing part of Electronic Evidence Discovery's business.  It consults with companies to prepare them to respond to electronic discovery in a timely and cost efficient way.  Most of its clients are Fortune 1000 corporations.

Computer Forensics Inc. is another Seattle company specializing in electronic discovery.  "We opened our doors in 1994," says Joan E. Feldman, president. "We expected most of our work to be investigative, but more and more we're being approached about providing electronic risk control."

Most companies Feldman works with are not defendants in a suit nor are they on notice that a suit is likely.  Thus they are free to begin the systematic handling of electronic information.  "It's a big step," says Feldman, "but you have to start somewhere."

An inventory of information that has accrued over the years, often on backup tapes, is the first chore.  Usually she finds a mix of e-mail, financial records, database compilations and word processed documents.

Determining how old the information is comes next.  According to Feldman, a surprising number of companies simply backup everything and store it indefinitely.  "We've seen information that is 15 years old and more.  It migrates from one system to another as the technology changes."

Corporations frequently fall into the trap of using their disaster recovery plan, which requires taped backup of essential information, as a record archiving system for just about everything.  "The information systems people tend to be ruled by Murphy's Law," says Feldman.  "They want to keep it all, because you never know when you might need certain information.  In-house counsel tend to want to get rid of things pretty fast.  A long, hard discussion between IS and the legal department is usually necessary."

It comes down to acknowledging each side's concerns and striking a balance that works for the individual company.

"They all have different needs," says Feldman.  "I often find myself recommending a rotation schedule in which e-mail, for example, is taped over every 30 days."

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