Data digging can be legal headache

Thursday, November 8, 2007

By MARTHA McKAY
STAFF WRITER for The Record

Here’s a fact to consider: As much as 70 percent of all electronic documents your business generates will never be printed on paper.

So what, you say? Isn’t the paperless office a good thing?

Well, it depends.

If your business gets sued, it’s no longer a matter of leafing through boxes for letters, files or other papers that lawyers typically request during the initial discovery phase of a lawsuit. These days, a suit against a company, or any other organization, is likely to trigger a new kind of cyber-scrambling.

Instead of searching through boxes, you’ve got to search hard drives, servers and backup tapes. Your IT guy might have to wade through two years’ worth of stored e-mail for messages related to the suit. And you may end up paying a small fortune for a legal team (because it will take a team to do the work) to review all the electronic documents that turn up despite trying to refine a search using words related to the specific case.

It’s not hard to imagine that this could become a really big headache for any size business.

“Companies are starting to drown in their own e-mails and electronic files,” said Patrick J. Burke, assistant general counsel for Guidance Software Inc., computer forensic specialists based in Pasadena, Calif.

In December, a set of federal guidelines came out that gave lawyers and courts a better framework for how to deal with electronic discovery issues. The new rules force participants in a lawsuit to think early on in the process about the quantity of electronic documents that need to be produced, who is going to pay for them, and how the process will be done.

As for awareness in the business community about impact of the new rules, most lawyers believe the news is filtering out.

“Businesses with in-house counsel are either aware of it or are beginning to be aware of it,” said David Kohane, a litigator with Cole, Schotz, Meisel, Forman & Leonard in Hackensack. “Companies involved in litigation are definitely aware of it.”

What they might not be aware of, however, is cost.

The sheer volume of e-mail sent by businesses these days means the amount of information you’re likely to have to sift through is big. Really big. Think about how many times an attached document might be circulated around an organization in an e-mail and you’ll start to get the idea. Or consider what might happen if a lawyer asks for a document dating back 10 years or more that’s stored on a musty backup tape in a format no one uses anymore (remember WordStar?).

Your business may end up with people sitting for 10 to 12 hours a day reviewing the mass of electronically stored documents before they are handed over to the legal adversary requesting them.

As Jeffrey J. Greenbaum, a veteran business litigator with Newark law firm Sills Cummis & Gross, put it, this could cost your business “oodles of money.”

Greenbaum told of one case he handled in which his client was forced to drop the lawsuit because the cost of electronic discovery was simply too high.

Not surprisingly, there are a slew of technology companies that offer methods of combing through backup tapes and sniffing around desktop hard drives to retrieve the relevant data. Many of them are also in the business of offering storage and archiving services.

AXS-One, a digital archiving and records management company based in Rutherford that offers businesses e-discovery services, says it is starting to see companies come to them before they get hit with a lawsuit. And they predict more changes to come.

“Over time, IT management will start to need to have a very good handle on what’s involved in litigation and [a company’s] general counsel and outside counsel will become much more savvy about IT,” said Marie-Charlotte Patterson, a vice president of market strategy at AXS-One.

Rick Wolf, a former top lawyer for Cendant Corp., has been through the e-discovery wringer.

As senior vice president and head of global compliance, he coordinated that company’s effort in 1998 to secure e-mail backup tapes in connection with a grand jury subpoena.

Today, along with tighter regulations governing what records must be retained by companies, the cost of storing all that electronic data has dropped, said Wolf, who now runs his own consultancy, Lexakos in West Orange.

“[Storage] is almost a commodity,” said Wolf. “It’s affordable to store the information, but it’s very difficult to preserve what you need and destroy what you don’t.”

That is the big problem. If you continue to allow your employees to communicate using e-mail, instant messaging, mobile text message services and more, then your business needs to think about getting a good records retention policy in place that both in-house lawyers and IT people can agree on.

It’s easier said than done, the experts say.

“Everybody knows what they need to do,” said Wolf, “but it’s very difficult to execute.”

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