Avoiding High-Tech's Troubles

by Adam Cohen

Even high-tech companies?the very ones that make the computer products with which we all generate electronic documents?can get caught up in the vortex of the preservation and potential spoliation of electronically stored information (ESI). While Silicon Valley has been busy creating technology for the rest of us, it seems that some of its companies may have overlooked the technical solutions that today can help keep businesses from running afoul of e-discovery rules and regulations. (Of course, any robust e-discovery plan also includes the basics of document-retention policies, litigation-hold procedures, and other elements.)

Consider, for example, the patent infringement case Phillip M. Adams & Associates, LLC v. Dell, Inc. (621 F. Supp. 2d 1173 (D. Utah 2009)). Last year a federal district court faulted one defendant, Asus, for having no centralized document-retention policy or system?and in particular, no procedure for implementing litigation holds in response to preservation duties. Asus, which makes computer components such as motherboards, relied instead on individual employees to manage their own ESI. As a result, Asus lost information that should have been preserved and produced.

The ongoing case is of particular relevance to California now that the state has enacted its own new e-discovery rules. These include a safe-harbor provision almost identical to the federal rule under which Asus defended its behavior: Parties and their lawyers are shielded from sanctions when information is lost as a result of "routine, good faith operation of an electronic information system." (Cal. Code Civ. Proc. § 2031.300(d)(1).)

Of course, if an international company had to track and manage the email of all of its employees without automation, critical emails understandably could get lost. But the market today offers many high-tech products that help companies gain centralized control over their ESI.

For example, email-archiving software often lets administrators preserve emails from identified custodians?based on parameters such as relevant keywords and date sent?with no need for individual users to do anything on their end. This can significantly improve compliance and reduce costs associated with preservation failures. Though such archiving technology lacks the sophisticated search-and-analysis capabilities of tools built specifically for e-discovery, it can greatly ease enforcement of document preservation.

A different set of issues arose in a recently settled case in which chipmaker Advanced Micro Devices alleged that its competitor engaged in anticompetitive practices (In re Intel Corp. Microprocessor Antitrust Litig., 258 F.R.D. 280 (D. Del. 2008)). According to defendant Intel, the person administering the litigation hold forgot to send notices to several hundred individuals with relevant data. Intel argued that the evidence destruction resulting from this "human error" did not warrant severe sanctions.

Such human error may be avoided by using commercially available software to manage, monitor, and implement litigation holds. Particularly for large companies that manage multiple, ongoing, and overlapping holds in concurrently pending cases or potential cases, the old method of having a paralegal manually track documents on a spreadsheet is becoming obsolete. To varying degrees, the new tools automate sending hold notices, tabulating responses, reminding legal personnel to send updates, and other administrative steps that can have serious consequences when overlooked. As awareness of the availability of such tools spreads, courts are likely to become increasingly skeptical of sophisticated parties that use unsophisticated methods to manage holds or that lose relevant ESI through human error.

Indeed, many companies will eventually have to enhance their IT capabilities to avoid courts' disapproval. In e-discovery, the malleable standard of reasonableness is applied far more often than most clients might like, and views about what actions are reasonable will likely evolve as technology advances. In the meantime, businesses that regularly face litigation need to consider what technology they should be using to keep from settling meritless cases just to avoid potential e-discovery sanctions.

Adam Cohen is a senior managing director with FTI Consulting and a former litigation partner with Weil, Gotshal & Manges. He has coauthored two books on e-discovery, and teaches it at Rutgers and Fordham law schools.

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