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Last year, nearly $2 billion was spent on the retrieval and review of electronic information in litigation. With no document-retention policy to manage this information, companies could be forced to spend astronomical sums just to retrieve it, and face court-imposed sanctions to boot. Developing a comprehensive document-retention plan is not only practical; it has become essential. But the benefits of preparedness offer more than just compliance with new rules; they offer structure and efficiency for the ways companies do business. Here are some practical suggestions for corporate counsel to develop and implement electronic data storage and protection plans that comply with the 2006 rule changes. In December 2006, federal courts adopted new rules that increased companies’ responsibilities for maintaining and producing electronic documents and other information. These rules have not only increased the workloads of legal counsel, but also have become a driving force behind the necessary development of stronger relationships between counsel and chief technology officers in companies of all types. In the absence of explicit federal guidelines on the handling and use of electronically stored information by counsel, there is a scramble for lawyers and corporations to come up with plans that will allow them to work with electronic data in order to comply with the new federal rules. Instead of dreading new rule changes, companies should view the recent emphasis on electronic communication as an opportunity to revisit their policies for data management and retention. A review of their information systems and policies can result in not only better preparedness for potential litigation but also more predictable records-retention practices. Indeed, before developing an efficient and effective data management system, any in-house counsel should first familiarize himself with the company’s hardware, network, major software, e-mail, voicemail, and other electronic data systems. Equally important is understanding how they function together and how documents are electronically “filed” or destroyed, and whether deletions occur automatically. For example, although most attorneys probably recognize e-mails and attachments as electronic data, few are aware of the volumes of metadata associated with these familiar electronic documents. Metadata may be an important and even crucial aspect of the case. NO POLICY, NO SANCTIONS? Recently, Reed Smith was retained by a government contractor to develop its document-retention policy. In our first meeting, we sat down with the corporate counsel to discuss the existing practices, what policy they should have for document retention, and how the policy could be implemented consistently. He was concerned that having such a policy could subject the company to sanctions for spoliation of evidence, as happened to Arthur Andersen in the Enron case. Although he understood data management and systems generally, he was unfamiliar with the hardware, storage and mobile computing capabilities the company had across its dozens of subsidiaries around the world. After an initial meeting, we provided the client with a list of questions about the company’s systems and capabilities. After briefly reviewing the list, the corporate counsel stated, “I can’t begin to answer these questions without understanding our systems. I need to meet with our CTO.” The meeting with the company’s chief technology officer included not only specifics about the data management system, but also the goals of the program and how to ensure compliance. That meeting is a crucial step for all companies facing discovery. At this meeting the company’s chief technology officer should be prepared to provide counsel with a detailed description of the company’s computer systems, including the hardware (servers, main frames, work stations, laptop computers, personal digital assistants, voicemail system, and printers), primary operating systems, major software systems, and any specialized software the company uses. In addition, the company’s IT department should provide a detailed description of how the computers are networked. How do users log on? Is the network accessed remotely from home PCs or personal laptops? Where are the servers located? Are they backed up, and how? Is voicemail stored on the system as well? Finally, the technology officer should describe the backup processes and schedules, document retention and destruction policies, and the location and medium of stored data, and identify the company personnel who are responsible for each area. This example illustrates how open lines of communication between counsel and IT specialists are the only way to develop a comprehensive plan. Once both parties understand the legal needs and technological capabilities of the company, a plan can be developed which not only fulfills these needs, but enables the company to become more efficient in its day-to-day management of electronic information. NO PLAN, BIG CONSEQUENCES Here’s a cautionary tale: An adversary in a current Reed Smith litigation matter is experiencing the distressing consequences of document management gone awry. Although the case involves a computer-savvy company, there appears to be a pronounced disconnect between corporate counsel and the company’s IT personnel. In addition, the company chose to have its in-house counsel undertake the discovery effort in the matter. The company has no written document retention policy, a recently introduced and only partially followed e-mail retention policy, and no practical way to retrieve e-mail from stored backup tapes. As a result, neither corporate counsel nor the company can account for e-mails and other electronic documents that have been in their document productions. In fact, after two hearings on a motion to compel, the court specifically asked whether corporate counsel personally reviewed the documents in question. Because of concerns about the production’s completeness, the reliability of the collection process, and concerns that relevant documents were automatically deleted, the court ordered both corporate counsel and the company’s CEO to execute affidavits stating what documents have been produced, what documents have been destroyed, and certifying that all discovery responses are complete. Without those affidavits, the consequences could be dire: the court has indicated it is on the verge of entering a default judgment against the company. A well-developed document retention plan may have prevented this scenario. The next step in the process involves counsel developing a plan for organizing, maintaining, deleting, and producing the company’s electronic data. The centerpiece for this plan is the document-retention policy, which should be drafted with the input of the company’s key officers so that statutory or customer-driven retention needs are met. Richard Kelsey, president of Turiss, a computer forensics and electronic discovery company, sees many imperfect retention programs. Ideally, he says, a good document-retention plan does not merely strive to retain all electronic data — it retains, organizes, categorizes, protects and, where appropriate, backs up critical electronically stored information. Counsel, in turn, must educate the chief technology officer as to what is a reasonable policy in its industry for document retention and provide an idea of what information must be available for production. Counsel should discuss the goals of reasonable retention, a means of suspending deletions of all types of electronic data (known as a “litigation hold”), and a means for ensuring that the policies are being followed uniformly in all corners of the company. TAKE A FRESH LOOK Unfortunately, some companies get by without a policy for electronic data storage. The “if it ain’t broke, don’t fix it” approach is, however, no longer adequate. Of greater concern is that companies with no policies at all risk the inadvertent deletion of electronic information after the onset of litigation, which puts them at risk of court-imposed sanctions. Even companies that have centralized their data storage would be served by creating or updating their procedures to ensure predictable and repeatable results when information requests are received, whether they are subpoenas, Freedom of Information Act requests, or government-enforcement records requests. Most companies will benefit from counsel and technology officers re-evaluating their individual and mutual electronic storage issues, even if the changes they make are relatively minor. A good way to plan for litigation responses is to form teams of e-discovery experts, in-house counsel, and information technology professionals. These teams work together to devise document retention plans and to maximize advances in data management and storage the technology. In the case of litigation, this team oversees the litigation hold, ensures compliance, organizes relevant documents, and coordinates with outside counsel and any necessary vendors for production. Convincing a company to invest in document retention plans can be like trying to sell life insurance to an 18-year-old. “Many companies that have not been through a costly piece of litigation believe it will never happen to them and have no idea of the true costs involved in data collection,” Kelsey says. A discussion of storage issues can turn into a budget request for a systems upgrade, which can distract the IT department from the underlying goal. Investing the money to prepare now will pay far greater dividends in the years to come. Electronic data requests will redefine the relationship between IT and legal departments, but this marriage need not be an unhappy one. In fact, it can result in more efficient information management. After all, what’s in your electronic filing cabinet? It is a question that companies and their counsel must ask themselves, and they should find out before their answers are held under the microscope in a lawsuit.
George Kostel, a partner, and Richard Kelley, an associate, practice corporate litigation in the Northern Virginia office of Reed Smith and routinely advise companies on document-retention practices.

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