While the same old principles of common sense and good faith still apply, the retention and discovery of electronic information requires a somewhat different approach from that of paper documents.
“It’s a difficult issue because of the magnitude of the information,” says Todd Burke, a partner in the advocacy department and the national leader of the commercial litigation practice group at Gowling Lafleur Henderson LLP.
Just the sheer volume of electronic information (e-mails, documents, databases, etc.) that goes on in the course of business makes the topic of e-discovery daunting.
To add to the confusion, e-documents and information can easily be deleted, intentionally or otherwise, and data thought to be destroyed in the ordinary course can sometimes be recovered. Delete never really means delete.
As well, the preservation, review, and production of electronic data can be time consuming and costly, and difficult when there are no standard formats or protocols, unlike the United States, which just enacted federal rules dealing with electronic data.
This is why it’s key that corporate counsel have policies in place to remain ahead of the electronic curve, experts say.
First off, counsel need to know and understand the information the company possesses, the manner in which it is being stored, and the location of the information is crucial.
Of course, this isn’t the kind of stuff you want to be figuring out once a production order has been served, says Corey Fotheringham, senior manager, financial advisory, at Deloitte & Touche LLP.
“Normally in-house counsel have a million things to think about, they’re not always thinking about retention policies or that there might be boxes of data at Iron Mountain (a data storage firm) that belong to the company that potentially have to be produced,” he says.
When it comes to drafting a document retention policy, counsel should be working closely with the IT group, as well as outside counsel if necessary, to determine how long e-mail and files are kept on an employee’s computer, how long that info should be kept on the server, how often back-ups are made, how long back-up tapes are stored, etc.
“Anyone who has a stake in the management of information within the company would be part and parcel of that discussion. Then external counsel can interface with those individuals to talk about the proper protocols, to talk about the appropriate retention periods, which may be specific to the particular business at hand,” says Burke.
“It may be statutory and regulatory requirements that you may have to adhere to, and if a public company is operating not only in Canada but in the U.S., you may also feel it necessary to retain U.S. counsel to give some advice with respect to Sarbanes-Oxley, etc.”
Once these decisions have been made and a policy is in place, it’s key to make sure employees understand what their responsibilities and obligations are, says Brian Reny, vice-president, national director of electronic discovery, at KPMG.
“The Ontario guidelines (see Guidelines sidebar) highly recommend that in-house counsel and the IT group meet with the key employees within the company and explain to them their obligations. Beyond that, you really need to reinforce that message on an ongoing basis,” he says.
After determining a formal document retention policy, companies are wise to have a formal “litigation hold” process in place in the event that the company is threatened with a possible lawsuit. That means employing a process that treats an incident as if litigation is likely and secures the appropriate documentation.
Reny says the policy must establish specific responsibilities for all effected parties, including: senior management, in-house counsel, external counsel, IT personnel, records management personnel, chief information officers, risk management personnel, and the employees or custodians of the information.
“Senior management should reinforce the need to comply with those policies or litigation holds as they come out. Even further than that is potentially having employees certify with a written signature that they have complied with those policies during the relevant time frame,” Reny recommends.
“I think what a lot of organizations don’t anticipate is they create a written document that then becomes policy but unless it’s more of a program than a policy, you’re really not going to get compliance,” he says.
“They can be very elaborate. It really needs to establish responsibilities across the organization for a whole series of different individuals. It can’t just be a policy that people have to take it upon themselves to ensure they’re complying. There has to be people designated with specific roles and specific responsibilities for ensuring that the company is compliant.”
Deloitte’s Fotheringham says IT departments always get called when the company is facing potential litigation — it’s a natural reaction.
“Just by the nature of what their field entails, they can be actually trampling over evidence and destroying evidence unintentionally. When served with a preservation/production order, the best things in-house counsel can do is get external counsel assistance on how to best proceed,” he recommends.
Reny says at the first sign of litigation, the onus is upon the company to ensure that they begin preservation of any relevant information. A litigation hold will cover issues such as ensuring that no hard copy records that relate to the litigation are being destroyed, ensuring that no electronic records are being deleted either from the employee’s hard drive or the network servers.
Again, it’s key to always be in contact with ITs throughout, making steps to ensure they aren’t utilizing their document destruction policy to unintentionally delete pertinent information.
“A lot of companies have a policy in place for litigation holds whereby they ask employees to move all of their information to a secure spot on the server, not being aware that simply moving that information from their laptop computer or desktop computer can impact some of that underlying data,” says Reny.
Burke says he has clients who are multinational companies that have individuals and departments dedicated to the administration of litigation holds.
“You can imagine in a company that has offices throughout the world, this can be a rather complicated exercise to ensure those steps with respect to preservation are being taken,” he says.
Failure to take these steps could be costly for your company.
The biggest example of a corporate blunder (or a corporate cover-up, depending on who you ask) is the often-cited Zubulake v. UBS Warburg LLC.
Much of the attention on Zubulake has focused on the judge’s seven-part test for determining when corporate defendants can be required to turn over electronically stored information as part of a discovery request during litigation. But another important aspect of Zubulake is the court’s requirement that corporations and their lawyers take affirmative steps — through imposition of litigation holds and communication with employees — to ensure that electronic evidence isn’t destroyed, whether accidentally or intentionally.
A female equities trader who claimed that she was discriminated against filed the case in New York federal court in 2002. During the course of the lawsuit, the parties battled over a number of crucial discovery issues — including which side should have to pay for producing e-mail that was contained on computerized backup tapes, and whether the company or the employee should bear the cost of restoring backup tapes.
Ultimately, the judge found that the employer willfully deleted relevant e-mails and, on that basis, allowed jurors to assume that the missing e-mails would have been damaging to the employer. In April 2005, the jury ruled in favor of the plaintiff and awarded her more than $29 million for an employment discrimination case.
However, in the wake of Zubulake, the scale has tipped in the U.S. and the emphasis on retention has scared many companies into retaining large amounts of useless electronic data. Now with the federal rule changes, there will be costly consequences.
“Our courts aren’t as lucrative as the United States, so you’re not going to get all the data,” says Fotheringham. “So we have to implement more thought process in the collection of the data.”
Firms like his provide services such as “de-duping” results. This simply means removing the duplicates, such as an e-mail exchange between several employees. You may end up with 50 different versions of the same e-mail.
“You all want to get through everything as quickly as possible. Why read the same e-mail 300 times when you know it’s the same e-mail?” he says. “We go through the de-duping process to remove all the duplicates and cull it down to a more controlled number. When these things happen, they usually want everything done yesterday.”
Burke says his advice to corporate counsel would be that a good common sense approach that seeks to achieve a good-faith effort at production is going to take you a long way in this new world of e-discovery.
“If you look at it, a lot of this is common sense. This is not a fundamental revolution in the way that we litigate,” he says. “It’s maybe a fundamental revolution in the manner in which material is presented or produced but the old principles of production is the same as always.”
Fotheringham agrees and says, “It’s discovery, you’re just dealing with electronic data and the reason it’s come about is that the information is so vast now. It has to be gathered, culled and produced in a manner that can be dealt with.”
