United States: Perspective: Clock Is Ticking On e-Discovery

Dec. 1 is almost here, a significant date in the legal world when amendments to the Federal Rules of Civil Procedure will take effect. These rules govern electronic discovery and, in theory, are supposed to reduce litigation costs.

However, it turns out the rules may actually increase litigation costs, especially regarding work that must be performed within the first 120 days after a lawsuit gets filed. What's more, if a party gets it wrong by not properly producing electronic discovery, the resulting penalties can be gargantuan.

The new rules are designed to set out early structure, uniformity and predictability when it comes to e-discovery. Yet, from the very start of a case, the parties need to start evaluating with their IT teams and outside counsel what they need to do to produce relevant electronic data. That effort can be enormous, as data can be located live on a network across multiple servers, on backup tapes, on hard drives, laptops and personal digital assistants.

The failure to produce relevant electronic evidence, when truly required, can have dire consequences.

Opposing parties still will be able to argue that the evidentiary value of particular categories of electronic evidence is outweighed by the burden of searching, retrieving and producing that information. However, the magistrate, discovery referee or judge assigned to adjudicate discovery disputes on a given case may not agree.

And the failure to produce relevant electronic evidence, when truly required, can have dire consequences. A recent case illustrates the point:

In the case of z4 Technologies v. Microsoft Corporation, a defense witness revealed at a deposition immediately before trial that an e-mail he had sent to Microsoft had been provided to Microsoft attorneys more than a year before the deposition.

It turned out Microsoft had withheld production of the e-mail until responses to deposition questions revealed the existence of the e-mail. Once that was revealed, the presiding federal judge ruled that the e-mail was favorable to the plaintiff's position, which did not help the cause of the defense in dealing with its failure to produce.

The judge's decision also pointed out that Microsoft failed to correct deposition testimony eight months before the start of the trial stating that an alleged database did not exist. In addition, the judge concluded that Microsoft neglected to apprise the plaintiff that the database could be located in a sub-folder on a particular CD that had been produced.

As a result of this and other (mis)behavior, the judge determined that the defense had engaged in litigation misconduct and ordered Microsoft to pay additional damages of $25 million, as well as almost $2 million in attorney's fees to the plaintiff.

The judge noted that he had the discretion to award triple the jury's verdict because of the litigation misconduct. That would have amounted to an extra $345 million in damages. Luckily for Microsoft, he decided not to pull the trigger.

The z4 case demonstrates how even a company with the size and sophistication of a Microsoft can get it wrong when it comes to electronic discovery. But if Microsoft can get it wrong, less sophisticated companies also can get it wrong--companies that may not have the financial wherewithal to afford the extra damages for e-discovery mistakes.

The witching hour of Dec. 1 is almost here. If they've been procrastinating until now, companies would be smart to begin working with legal advisers skilled in the e-discovery arena. Such counsel can develop a plan to help ensure that relevant electronic data is preserved, searchable and ready to be retrieved and produced in as economically efficient manner as possible.

The clock is ticking.

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