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Amendments to the Federal Rules of Civil Procedure regarding E-Discovery - Part 4

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By Benjamin Wright

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Posted: 13 Feb 2007
 

As of December 1, 2006, the Amendments to the Federal Rules of Civil Procedure made electronic records a standard part of litigation. The amendments show that enterprises have incentives to keep more complete e-mail archives and to retain those archives for longer periods of time. An enterprise that has destroyed its e-mail records prematurely, or that cannot account for the electronic records it does possess, stands to suffer more in a court today than might have been true some years ago.

Amendments to the Federal Rules of Civil Procedure regarding E-Discovery: What you need to know - Part 4

Sanctions for Destruction of Records

The destruction of records after litigation starts leads to another key issue in e-mail retention policy. It is well-established that courts will sanction an enterprise that tolerates the destruction of its records when they should be preserved. But for an enterprise to know, on any given day, what should be preserved for the future is not easy.

In the operation of a corporate IT system, records are constantly being created and deleted. But courts expect that the destruction of records relevant to pending litigation be suspended while the litigation is pending. This suspension is informally known as a "litigation hold." For a complex enterprise, to design and implement a litigation hold can be a big challenge. The firm must know what records it possesses, know which are relevant to the lawsuit, develop a practical plan to protect those records and so forth.

The amended rules of civil procedure cast a spotlight on the topic of a litigation hold for electronic records. But the spotlight does little more than emphasize the importance of the topic. It offers no more than vague guidance on what an IT manager really needs to do.

Amended Rule 37(f) provides: "Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system."

Although 37(f)'s quoted language may provide IT managers some comfort that their companies will not be penalized for allowing e-records to be lost in the ordinary course of business, the amount of comfort is small. The protection from sanctions applies only "absent exceptional circumstances" and only in the presence of "good faith."

In real-world lawsuits, it is often a point of contention whether exceptional circumstances - such as knowledge that a lawsuit is coming - were present at the time any given record was destroyed. And good faith is a subjective standard. A manager therefore cannot know, at the time a decision to destroy is made, whether the action will be deemed satisfactory under 37(f).

Amended Rule 37(f) implicitly reminds the manager of the need to place a "hold" on the routine destruction of records after litigation breaks out or becomes reasonably foreseen. The reason the manager must implement a "hold" is this: The manager can't very well claim to be acting in good faith if he allows routine record destruction to continue while knowing the records will be needed for a known (or expected) lawsuit.

In practice, implementation of a litigation hold over electronic records can be tricky. A case in point is Linnen v. A.H. Robins Co., Inc. (cf. Mass. Superior Ct. No. 97-2307, June 16, 1999, Memo. of Decision and Order.). After a drug company was sued for products liability, it instituted a litigation hold over e-mail records. This meant the IT staff saved new e-mail after it was created. Yet, unfortunately, the IT staff continued its long-standing practice of recycling tapes that held old e-mail records. This recycling caused old records to be over-written. Later, when the court learned the old records were no longer available, it sanctioned the company.

Although A.H. Robins was decided before the new amendments to the FRCP, the outcome could have been the same under amended Rule 37(f). Even though the e-mail tapes were recycled (and records were lost) in the routine operation of the company's information system, an exceptional circumstance was present. The exceptional circumstance was the existence of the lawsuit. The exceptional circumstance dictated the company needed to be working diligently to interrupt normal routines and preserve e-mail records.

Cases like A.H. Robins suggest that smarter enterprises will give themselves a wide margin for error. Courts are punishing companies for failing to retain their e-mail. Courts judge companies from the perspective of hindsight. So in close cases, it is hard for companies to avoid sanctions. It is wiser to keep more records longer.

Steps an Enterprise should Take

The amendments to the FRCP do not make the IT manager's job any easier. They reflect a greater desire in the courts to hear early in a lawsuit about the e-mail retained by the enterprise. And they threaten sanctions for blunders.

An enterprise is therefore wise to maintain e-mail in a dedicated, centralized archive that facilitates reasonably quick searching. It also should be keeping more e-mail records than it might have in the past.

The retention of e-mail costs money, and enterprises have to live within budgets. As an IT manager allocates budget for storing e-mail, greater resources should be devoted to keeping the most valuable e-mail. Normally the most valuable class of e-mail in an enterprise is that of executives and other decision makers.

About the Author

Benjamin Wright is a Dallas-based attorney and author of numerous publications on technology law, the most recent being a series of educational videos and study guides on best practices for managing email records. benjaminwright.us

Ben Wright recently released a series of educational videos on the best practices for e-mail record retention and compliance. For more information about how you can get this exclusive 4-hour DVD Kit, visit:
http://www.messagingarchitects.com/company.cfm?doc_id=1194&CID=82006


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