Financial Firms Still Coming to Grips With E-Discovery

Despite the penalties for inadequate e-discovery capabilities, many firms still are challenged to establish effective programs.

By Melanie Rodier 

A year and a half after amendments to the Federal Rules of Civil Procedure (FRCP) ushered in critical new e-discovery obligations for parties to lawsuits in federal court, Wall Street firms still are scrambling to come to grips with the e-discovery burden.

“I would have thought corporations would have recognized and responded much more quickly to the new amendments, get their papers in order and have a litigation plan ready,” relates Hope Haslam, director of consulting services at Epiq Systems, a provider of integrated technology products and services for legal proceedings. “But that’s not happening as often as I would have hoped.”

Legal counsel, Haslam adds, can be intimidated by the technology needed to recover documents in an e-discovery case, and as such may not encourage firms to engage in the process. “There’s a possibility that they don’t want to go to their fellow executives and say, ‘We need help,'” she contends.

Following the FRCP amendments, businesses must have clear policies on data retention so that they can easily identify what data is applicable to a discovery motion. They also must address e-discovery issues — including preserving discoverable data, developing a plan for producing the data within a reasonable amount of time and determining the format in which the data will be handed over — upon the filing of a case. When a company cannot produce data subject to discovery, regulators can slap them with huge fines — as Morgan Stanley and UBS, among others, have found out in what emerged as landmark e-discovery cases in the securities industry.

Nevertheless, Haslam asserts, with the exception of publicly traded companies, many corporations don’t have adequate e-discovery procedures in place and are playing Russian roulette — they’re just hoping they won’t get sued, she says. “This is because the e-discovery requirements talk about how you don’t have to be prepared until litigation is anticipated,” Haslam explains.

Some experts say firms underestimated the impact of e-discovery regulations. “When the rules came into effect, some wondered if it was going to be another Y2K issue and much ado about nothing without any tangible results,” says John Patzakis, chief strategy officer at e-discovery vendor Guidance Software. “But this proved not to be the case.”

One of the main e-discovery problems with which firms have been grappling is skyrocketing data volumes. According to a study by The Radicati Group, in 2007 a typical corporate e-mail account was expected to generate around 4.3 gigabytes (GB) of electronic data. The number is forecast to grow to 6.7 GB per year by 2011.

One executive at a top buy-side firm on Wall Street with expertise in the area, speaking on condition of anonymity, says things are only going to get worse as people find new messaging streams. “You can’t limit the data, but you can have technology to cull data and search through it,” he says.

According to Lisa Walkush, managing director at SMART Business Advisory and Consulting, increasing data volumes make it even more critical for firms to have strong records management policies in place. “Companies really need to understand where their data resides and have really good retention policies,” she adds. “And when the record-retention time frame is up, you want to get rid of it. So someone needs to be managing record policies.”

For more see WallStreetandTech.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: