E-Discovery Risks to Small Business
It is no small feat to operate a small business successfully today. The risks faced by the business owner seem in many ways more formidable now than every before. Many new entrepreneurs are in some small way naive to the risks they face. And perhaps that’s a good thing, otherwise many new startups simply wouldn’t. No new small business owner *expects* that their business will be a party in litigation, but every seasoned owner knows the truth: it is a *virtual certainty* that the business will be sued. How these risks are managed can and will sometimes be the determiner of corporate survival.
Which leads us to the “Risk of the Day”: E-Discovery.
When litigation commences, depending on the circumstances of the stated complaint, the parties to the lawsuit engage in a process called “discovery”. Basically, this is a form of “You show me yours and I’ll show you mine”. During the process each party is required to provide documentation that it has in its possession to the other side for review. In complex corporate litigation, the documentation to be reviewed can be absolutely voluminous- (I know this from personal experience!). But what happens when the documentation requested doesn’t “exist” in the physical world and is “electronic” evidence?
Some estimates suggest that greater than 90% of all evidence is electronic evidence. To instruct parties in litigation of their responsibilities under the law as it relates to electronic evidence, Federal Rules of Civil Procedure have recently been amended and can be found here if you’re willing (or daring).
E-Mail is an easy example of electronic evidence, but it is far from the only one. I have heard attorneys on both “sides” (whether defending or prosecuting) state that even if one was to print out every email, it might not necessarily be “enough” because your adversary (and the court) might not be convinced that *every* email was in fact printed and that you may have ‘inadvertently” retained certain emails that you think might hurt you. Even if you do not use email with customers (this is why many financial advisors will not utilize email, not to mention it is inherently insecure), attorneys are going to want to review internal emails between staff to get a flavor of the discussions “behind the scenes”.
“Legacy” computer systems is another area of concern. When systems are upgraded, many times “old” data is not imported into the “new” system. And even if some is, it is not uncommon that not all of it is. As litigation can deal with multi-year issues, this can be a particular problem area.
Your head spinning yet?
It’s probably helpful to boil down E-discovery risks into three basic trouble areas. Briefly, they are:
- Documentation Over-Production: Costs of legal review can be enormous if you produce *everything* and more often than not, documents that should not have been produced are now released into the public domain;
- Documentation Under-Production: Court sanctions and fines may be substantial for failure to produce documents that should be produced;
- Spoliation of Evidence: Spoliation is essentially actively destroying or modifying documentation or evidence, but it can also be a failure to avoid a destruction of evidence. So, in this case, the sin can be one of omission or commission.
The best general advice is to discuss e-discovery issues with competent legal counsel well before you *need* to. And, as a brief reminder, I am not an attorney and this post is not (nor is it meant to be) legal advice, but just a general overview and discussion of E-Discovery risks.