The new federal rules on e-discovery certainly have a hold on compliance executives’ minds these days—both figuratively and literally.
In effect since last week, the rules don’t specifically address the proper procedures needed to ensure that a company’s electronic data is “held” in the event of a lawsuit. But the dramatic change in how opposing counsels engage in litigation increases the importance of having effective litigation-hold policies in place.
The new rules “do not change how a legal hold should go into place or likewise the company’s obligation to follow that legal hold—nor do they clarify what you’re supposed to do,” says Tom Aleman, of Deloitte Financial Advisory Services. But what comes into much sharper relief under the rules, he says, is that a litigation-hold process “is a requirement that must be followed and be effective.”
Under the new rules, certain information that is not considered reasonably accessible—such as data on backup tapes—may not be subject to discovery, but that doesn’t necessarily mean the information can be destroyed. Rather, says Philip Upton, a principal with PricewaterhouseCoopers, companies must consider what information they have and where it is. “It’s 10 p.m.,” he quips. “Do you know where your data is?”
More In-House Staff Needed?
Curtin
The new federal rules may place more of a burden on in-house lawyers to manage litigation-hold procedures, according to some experts. Matt Curtin, founder of Interhack Corp., a data forensic and security consultancy, says staffing is “definitely something that is going to require looking at.”
Exactly what personnel changes may be necessary will depend on a company’s IT systems to handle data and records retention, Curtin says. “It’s a difficult area to get your hands around if you don’t understand the technology … A lot of companies will be able to benefit by having the right people internally work together.”
Mack
Mary Mack, technology counsel for e-discovery services provider Fios, says assigning an in-house person to oversee litigation-holds does have its advantages. First, internal staff are generally less expensive than outside counsel, she says. Also, in-house staff often can be more responsible for what is likely to become a task that requires close, immediate attention once litigation starts. “It’s not just a matter of sending out a note saying, ‘Please preserve,’” she says.
Andy Cohen, senior counsel at EMC Corp., notes that the new rules force litigating parties to meet and confer early on to discuss e-discovery issues—which will require a company to know up front what information it has, and what it can produce easily and quickly. That, he says, is an inside job.
Cohen
“Am I really going to want to pay outside counsel to learn [about what the company does] to prepare for a meet-and-confer anew, every time I have a new big case or new big subpoena?” Cohen says. “It’s really up to the in-house people to pull some of that content in advance, if for no other reason than I don’t want to pay my outside counsel every time we do this.”
Benefits To An Early Meet-And-Confer
Mack says another major change is the potential need to disclose and discuss litigation-hold policies with opposing counsels, which previously wasn’t likely to occur at the start of a lawsuit. Now, Mack says, “When you’re anticipating litigation, you need to be thinking about documentation and what you’re going to bring forward to demonstrate your good faith.”
Perez-Albuerne
Carlos Perez-Albuerne, a partner with law firm Choate, Hall & Stewart, says in-house lawyers for companies that are regularly in litigation will need a strong understanding of how the company’s IT systems function—when, usually, that knowledge is buried in the minds of IT staff. “That’s going to have to change, because you’re going to have to go into the early stages of the case with a concrete understanding of what’s available and what it isn’t,” he says.
Cohen says forcing the parties to confer about e-discovery issues fairly early in litigation “could be very beneficial to all the parties involved” by reducing uncertainty about what information needs to be preserved. “If I’m not going to talk about this with the other side for six months or nine months, then there is uncertainty,” he says. And that, he continues, leads to a default “save everything” policy to avoid any second-guessing after litigation starts about what should have been saved.
Klipp
Melissa Klipp, a partner with the Drinker Biddle & Reath law firm, says the burden on in-house counsel could be viewed as an opportunity, “if they work with outside counsel in a prophylactic way, rather than in a responsive way.” She encourages consulting with outside counsel long before litigation, to establish policies and procedures that minimize exposure. “Locate the information and locate the people who manage the information so they can effectively respond when that hold is issued,” she says.
Action Necessary Before Litigation-Hold
Joel Bennett, of Dykema Gossett, agrees that many of the protocols and policies mandated by the new rules must be designed and implemented before the litigation-hold even arises. “The key thing is to anticipate and plan in advance of an obligation” to save data, he says. “Complex IT systems have automatic delete functions; it’s hard to change all that when a claim is filed.”
Bennett
The letter that goes out to employees when a litigation-hold takes effect should be viewed as something that would be produced during litigation to show good faith, Bennett says. “Not only that, there has to be diligent supervision by the lawyers. You can’t just send out memos to the client and expect them to abide by it. The lawyer needs to go to the actual office and have meetings with the key people within the IT department, as well as the executives, so they are clearly instructed about their obligations.”
Perez-Albuerne says it will take time—and, most likely, court decisions—to determine how much the new rules will change litigation-hold procedures. “My vision is that, after these issues get sorted out, litigation-holds hopefully will be more realistic in terms of what’s to be expected,” he says. “It’s not practical to think that you can ensure every single scrap of data on a particular subject is going to be maintained.”
And Klipp says while companies may focus more attention on litigation-holds in the coming months as they adapt to the new federal rules, that aggravation may recede with time. “As long as counsel and IT keep up their relationship, as long as there’s a free flow of information, the years to come should not be as time- and cost-intensive as they are at this point,” she says.
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