Information Uploaded Onto Social Networks Can Pose Substantial Risks to Businesses If Not Properly Managed

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By Hafez Daraee

Being competitive in a constantly evolving, data-saturated marketplace requires businesses not only to make vast amounts of data available electronically, but also to update the data quickly and effectively.

So it is no surprise that businesses have started using social networks (for example, blogs, Twitter, and Facebook). But these new forms of communication have caused significant problems when businesses end up in legal disputes. Put simply, the information-management policies of most businesses have not kept up with what they must do when a dispute elevates to litigation or arbitration and requires them to respond to requests for related electronic information. In litigation, the courts view electronically-generated and stored information as essentially equivalent to information on paper. The courts expect businesses to preserve such information, find it, and produce it as required by pertinent court rules.

The deep inadequacy of business management of such electronic information was made clear earlier this summer with the results of a June 2010 survey performed by a leading forensic center on the effect of social networking. While two-thirds of businesses worry about e-discovery risks posed by data contained within social networks, 25 percent say they are not prepared to address related electronic information discovery requests, and 33 percent think they are only partially prepared. Moreover, only 9 percent of companies surveyed think they are well prepared for such discovery requests. And the situation is probably worse then even these numbers suggest, because businesses that think they are adequately prepared often find out that they are not.

Additionally, 55 percent of the companies surveyed said they had senior executives with some level of commitment to correctly managing electronic information, but those same companies responded that there was a substantial lack of understanding among junior executives and midlevel managers. Ironically, this survey also found that when it comes to electronic information management, communication between in-house legal and IT teams was very poor.

Recent cases have certainly proved that a failure to locate and produce pertinent electronic information related to a dispute in an accurate, complete, and timely manner can result in very harsh court-imposed sanctions, ranging from substantial monetary fines to the harshest sanction of all — the dismissal of a claim or a case with prejudice, or a default judgment against a defendant.

In order to mitigate risks, businesses must tailor specific policies that take into account the fact that data generated by businesses for social networks is data that, one day, business may have to account for, and businesses must ensure that these policies are carefully implemented. Many businesses are woefully behind the curve.

In creating and implementing an electronic document management plan, businesses should consider the following:

• Internal electronically stored information management — Know where information is stored and how to access it with a high degree of accuracy.
• External electronically stored information — Electronically stored information on external storage media owned by entities such as Facebook, MySpace, Twitter, or other social networks must also be accessible quickly and accurately.
• The cost — The time, expense, and resources necessary to accurately and timely respond to any e-discovery request will be directly proportional to the volume of data that must be accessed, how such data can be accessed, and where the data is stored.
• Education — Employees do not understand that social networks are not fully secure or fully private.

Businesses sometimes believe that if information is stored on third-party computers, such as those owned by Facebook, they will not be required to obtain or produce that data. Recent cases have made it very clear that this is not so. If the information contained on third-party servers is relevant, courts will presume that the responding party is obligated to produce all such information within the discovery process.

In order to avoid this trap, businesses should create policies addressing how social networks can be used for business purposes.

The dangers and demands created by uploading data onto social networks are not exclusive to businesses. They can pertain to any person or entity that gets involved in a legal dispute. For example, in the context of employment claims, especially when emotional distress is part of a litigant's claim, courts have held that an employee's posts on social networks can be a source of evidence about the employee's claims.

Social networks provide a very useful and legitimate vehicle for expanding market share, but it is incumbent on businesses to fully understand how social networks operate so that if a dispute requires access to data stored by these entities, the business will not be caught ill-prepared.

Published Summer 2010

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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