As explained by one court, “—[as] individuals and corporations increasingly do business electronically—using computers to create and store documents, make deals and exchange e-mails—the universe of discoverable material has expanded exponentially. The more information there is to discover, the more expensive it is to discover all of the relevant information…” Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 311 (S.D.N.Y. 2003).
Electronic discovery (e-discovery) can prove to be a cost-intensive undertaking. The following will provide important e-discovery considerations that should be taken into account before and during a legal dispute, as well as some guidance regarding the enforceability of electronic contracts.
Pre-Litigation Considerations
Before a lawsuit arises, a business should establish and maintain a reasonable document retention and destruction policy. For if (and when) a legal dispute arises, the business will be better prepared to meet discovery requests for electronically stored information (“ESI”) and avoid extensive costs or possible sanctions.
This should include an index identifying where ESI is stored, and whether or not the ESI sources are reasonably accessible. Furthermore, businesses should maintain a document destruction schedule that complies with both federal and state record keeping requirements.
Massachusetts requires certain industries and types of entities to maintain adequate records, specifically including pharmacies, ride-sharing companies, auto-repair shops and any corporation incorporated under the laws of the Commonwealth. These requirements do not explicitly cover electronic records, but the Massachusetts Uniform Electronic Transaction Act (MUETA) allows for any records required by law to be kept in an electronic format, subject to some additional criteria.
Maintaining a document retention policy becomes ever more critical when the duty to preserve arises. In Massachusetts, the duty to preserve is triggered when “a litigant or its expert knows or reasonably should know that the evidence might be relevant to a possible action.” Fletcher v. Dorchester Mut. Ins. Co., 437 Mass. 544, 550 (2002).
If records are not properly maintained, subsequently destroyed or altered, the party responsible may face sanctions from the court for what is commonly called spoilation (the destruction of evidence). However, sanctions are less likely to be imposed when records are destroyed pursuant to a valid document destruction policy. Mass. R. Civ. P. 37(f). Fed. R. Civ. P. 37(e). Nevertheless, when the duty to preserve is triggered, it is good practice for a business or other organization to suspend its routine document destruction schedule.
Finally, in the interest of privacy and reputation, businesses and other organizations should make sure employees do not use electronic mediums (e.g. email, text messages and social media) in a way that would shed a bad light on the business if that information were to become discoverable in a future dispute.
Considerations During a Legal Dispute
If litigation cannot be avoided, the paramount consideration is whether or not the ESI subject to discovery is “accessible.” If so, then the cost of discovery may be considerably less than it would be if there was relevant ESI that could be characterized as “inaccessible.”
The accessibility of ESI is important for two principal reasons. First, the scope of discovery is rather broad in that parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense. Mass. R. Civ. P. 26(b)(1). Fed. R. Civ. P. 26(b)(1).
Second, “the presumption is that the responding party must bear the expense of complying with discovery requests…” Zubulake, 217 F.R.D. at 316. Both the federal and state rules of civil procedure allow the court to order cost-shifting if compliance is shown to cause undue burden or expense. (e.g., if the ESI is inaccessible). Mass. R. Civ. P. 26(f). Fed. R. Civ. P. 26(c).
Courts have attempted to set a standard to determine whether ESI is accessible, but as technology advances, defining accessibility has proven to be an evasive target. This determination typically comes down to the format or source of the ESI.
“[A]ccessible sources generally include, but are not limited to, files available on or from a computer user’s desktop or on a company’s network, in the ordinary course of operation. The converse is information that is “not reasonably accessible.”
Examples of such sources may include backup tapes that are intended for disaster recovery purposes and are not indexed, organized or susceptible to electronic searching; legacy data that remains from obsolete systems and is unintelligible on the successor systems; and data that was “deleted” but remains in fragmented form, requiring a modern version of forensics to restore and review.” Chen-Oster v. Goldman, Sachs & Co., 285 F.R.D. 294, 302 (S.D.N.Y. 2012).
Even if ESI is found to be inaccessible, that does not mean that the court will shift the cost of discovery. Furthermore, the burden is on the party claiming inaccessibility to prove that the information is not reasonably accessible. Mass. R. Civ. P. 26(f)(4)(B). Fed. R. Civ. P. 26(b)(2)(B).
Accessibility of ESI is just one of several factors considered when determining whether to order cost-shifting for discovery, but the presumption against cost-shifting provides yet another incentive to maintain adequate electronic records.
If you have further questions regarding e-discovery or any of the foregoing topics, including your company’s document retention policy or compliance with state recordkeeping requirements, don’t hesitate to contact one of our lawyers today.