On December 1, 2006, amendments to the Federal Rules of Civil Procedure became effective and made something that had already been established by court decisions very clear – that virtually every kind of electronically stored information (“ESI”) is discoverable in litigation. Government construction contractors, and their attorneys, need to be concerned about the preservation and disclosure of electronic information, including e-mail messages, voicemail messages, and any kind of a file stored on a computer. Unfortunately, as the information age makes an exponentially greater volume of information available, the seemingly easy storage of that information may actually be creating a vast minefield for the unwary.
Contractors need to be aware that even computer files that have been intentionally or inadvertently deleted are potentially discoverable. (Simply because data has been “deleted” from a hard drive does not necessarily mean that it cannot be retrieved). Courts may no longer accept the excuse that “the files were erased” if there was an obligation to preserve the data, or if the company failed to have an established ESI retention policy to assure the reasonable retention of electronic information. The new rules provide guidance and clarification on a number of topics related to electronic discovery (e-discovery), including the discoverability of data that is difficult to access, such as back-up tapes, the form in which electronically stored information should be produced, and how to deal with the inadvertent production of privileged information when large amounts of electronic data are produced.
One of the difficulties with the production of electronic data is that it is often harder to review than paper documentation because it involves the examination of large amounts of data stored on CDs, DVDs, floppy disks, hard drives, backup tapes, network servers, Internet backup services, and other storage devices. A company often finds it to be an overwhelming task to gather the data, and an equally daunting and costly task to electronically produce it. Electronic information on a complex matter involving technical data can occupy hundreds or even thousands of CDs (we are currently involved in exactly such a case).
It is important to recognize that the content of electronic information can be very different, and far less formal, than paper documentation. We have noticed that there is often a tendency to be careless when writing an e-mail message because of the informality, as compared to a letter. Contractor personnel are frequently very candid in e-mail messages and they may make off-the-cuff remarks that give the other side “ammunition” to discredit the contractor’s position. In addition, electronic information often contains “metadata” (underlying data that states when a document was created, modified, accessed, etc.). Without realizing it, or intending to do so, an electronic file may provide much more information than the author or the company ever intended, or was required, to preserve and that information may be a goldmine for the other side in litigation.
It is important for contractors to examine their electronic document retention policies to make sure that they will not be subject to sanctions for failing to preserve electronic data. It is beyond the scope of this article to address the nature of an appropriate retention policy, and it will vary from company to company, but it is something that should be discussed with an attorney. Organizations are regularly being sanctioned for e-discovery problems. For example, Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co., Inc., 2005 WL 679071 (Fla. Cir. 2005) (inadequate e-mail retention policy and discovery collection procedures, resulting in judge-ordered shift in burden of proof and eventual $1.58 billion judgment, including $850 million in punitive damages); U.S. v. Phillip Morris USA, Inc., 327 F. Supp.2d 21 (D.D.C. 2004) (inappropriate deletion of e-data, leading to $2.75 million in sanctions and evidence preclusion); Zubulake v. UBS Warburg, L.L.C., 220 F.R.D. 212 (S.D.N.Y. 2003) (inadequate preservation and production of e-data, resulting in an adverse inference jury instruction, $232,500 in costs and an eventual $29 million judgment, including $20 million in punitive damages); Danis v. USN Communications, Inc., et al., 200 WL 1694325 (N.D. Ill. 2000) (inadequate e-data preservation and collection procedures, leading to an adverse inference jury instruction, $10,000 fine against CEO and $1.5 million in discovery motion fees).
While the above cases generally involved very large companies, it would be a mistake for a government contractor to assume that it is immune from these new electronic discovery rules. These new rules will undoubtedly be the subject of litigation and judicial interpretation in the months ahead, but one thing is certain – electronic data is here to stay.