Litigation Support and Risk Management for Pretrial Discovery of Electronically Stored Information
Ruhnka, John, Bagby, John W., The CPA Journal
Most organizations are eventually involved in litigation, and the increasing frequency of litigation often requires litigation support and careful records management. Familiarity with electronic data discovery (EDD) is necessary to conduct internal investigations, as well as to identify and disclose electronically stored information (ESI) to litigation opponents, regulators, or prosecutors. Many potential parties to a lawsuit are not knowledgeable about electronic records management (ERM) practices or their legal obligations when served with a discovery request. Accountants often serve important roles in litigation support and as expert witnesses. Indeed, Deloitte and KPMG are among the top 10 EDD service providers (see the 2006 SochaGelbmann Electronic Discovery Survey. www.sochaconsulting.com/2006 surveyresults.htm).
Electronic discovery is steadily increasing in importance. Several landmark cases have dramatically illustrated the need tor clearer, balanced standards of EDD, and the federal judiciary recently revised the Federal Rules of Civil Procedure (FRCP) to recognize the special problems of electronic discovery. These rule revisions are likely to reduce pretrial motion delays, require advance EDD planning, clarify the forms of electronic records that are discoverable, and balance the burdens among litigants. The following is an overview of the variety of discoverable electronic records, the legal responsibilities accompanying a litigation hold, and the strategies and costs of EDD in litigation support and litigation risk management.
Discovery of Electronically Stored Information
EDD is the modern version of document production traditionally required of all litigants during the pretrial discovery phase. Often, litigating parties and government agencies do not possess enough evidence to prove their cases. Civil litigants traditionally have the right to request "documents" and "data compilations" from opposing parties if relevant to the issues or their defense. Subpoenas are used to access such materials in regulatory investigations and criminal prosecutions. Federal courts can order opponents to produce potentially incriminating internal files and communications. Most states also have parallel discovery rules. The recent growth of EDD reflects how much modern business and government activity is conducted electronically. Under various estimates, 92% to 99% of all records and data are created and/or stored electronically [see Stephen D. Whetstone and Michael S. Simon. National Law Journal. July 17, 2006, at p. S1 (99%); Peter Lyman and Hal R. Varian, "How Much Information," Technical Report, School of Information Management, University of California-Berkeley, 2000, reprinted in Wirtxchafts Politisclie Blatter, 48, Jahrgang 2001 (over 90%)].
Typically, requesters first query about various repositories of ESI and print documents by serving "interrogatories," questions that opposing parties must answer. Interrogatories can compel important facts about ESI, such as its existence, its custodians' identity, its form, and its various locations. It is difficult to exhaustively inventory portable storage devices like personal data assistants (PDA), laptop computers, cellphones, iPods, and flash memory devices. The new FRCP removes any question that all such ESI is discoverable and subpoenable. just like other business records. ESI includes both the content and metadata of word-processed documents, spreadsheets, e-mail, e-mail attachments, instant messages, voice-over-Internet protocol (VOIP), information on PDAs and BlackBerries, reports, correspondence, memos, text files, PowerPoint presentations, digital photos, graphs, and any other data that are created or stored on a computer or computer network or other electronic storage media.
Any ESI, documents, files, or records are discoverable if they arc plausibly relevant to issues in upcoming litigation or the subject of a governmental investigation. …