December 12, 2006

Effective December 1, 2006, the Federal Rules of Civil Procedure, as they relate to discovery, were amended to address issues relating to electronically stored information (“ESI”).  The revised rules apply to newly filed cases, and pending cases “insofar as just and practicable.”  The Indiana Rules of Trial Procedure will likely be amended in the near future to incorporate similar changes.
 

But We Do Not Have Any Ongoing Litigation – Why Should I Care?

Lawsuits are nearly certain to happen for most companies.  With the new change in the rules, parties and their counsel are required to be ready to deal with ESI at the outset of litigation, and to have preserved ESI even before litigation.  Failure to be prepared can be harmful to your organization.  The harm can range from unnecessary expense and waste of time, to monetary or evidentiary sanctions, diminished credibility before the courts, and even criminal penalties in severe cases.

Where Do I Start and What Do I Do?

Proper training begins with knowledge.  You must know what ESI you have, where it is stored, how it is stored, who can access it, and the burdens and costs of accessing, preserving and retaining the ESI.  In compiling this knowledge be careful not to forget about legacy data (i.e., information from an obsolete system used by you or your corporate predecessors).  If you are thinking about acquiring another organization, look under the hood before you buy – as part of the due diligence process, ask the company you plan to acquire to provide you with a detailed list and/or inventory of the information it has in its possession.  Remember that information regarding your organization’s ESI is not static, and should therefore be updated as necessary.

When is the last time you spoke to your IT department?  Better communication and coordination between IT and legal is essential to prepare for litigation, and will assist in the gathering of knowledge of your company’s electronic systems.  Consider establishing a committee comprised of general counsel, the head of the IT department, and a records retention manager that meets on a periodic basis.

Though all lawsuits are different, similar obstacles and issues will arise frequently, especially discovery issues.  Establish and/or revise your records retention policies, and develop a “legal hold” policy.  Having a legal hold policy allows you to respond quickly to litigation.  Moreover, a legal hold policy demonstrates good faith, and may reduce or eliminate sanctions in the event of inadvertent destruction of ESI.  A duty of preservation arises upon the occurrence of a “triggering event,” and a legal hold is the first step a company should take in complying with this duty.  However, you must develop an understanding about when you need to preserve ESI.  A “triggering event” exists when there is reasonable anticipation of threatened or actual litigation.  What constitutes a triggering event may not be obvious in all cases, and in the event of uncertainty, you should seek the advice of counsel.

Recognize that differing organizations operate in different cultural contexts.  A “one-size-fits-all” approach cannot be used.  Although other factors may be relevant in tailoring a “litigation readiness” program, consider the following:

• size of organization
• industry
• corporate culture
• resources
• frequency of investigations/litigation

Litigation is inevitable for organizations.  However, a proactive approach to litigation readiness will minimize time, cost, sanctions, and business interruption, and improve corporate integrity and credibility before the courts.

For more information, including assistance in drafting or reviewing ESI-related policies, please contact Rebecca Biller Elmore at relmore@kdlegal.com, or 317-238-6352, or any other member of our litigation group at 317-636-4341.

This newsletter is published by the law firm of Krieg DeVault LLP for general information purposes only.  Material contained herein is not to be considered legal advice to any particular person.  Each person's circumstances are unique and must be evaluated individually.  Competent legal counsel should be sought before taking any action in reliance upon the information contained in this newsletter.  The contents of this newsletter may not be reproduced, transmitted or distributed without the express written consent of Krieg DeVault LLP.  © 2006, Krieg DeVault LLP