June 18, 2014

Practice Tips for Avoiding Electronic Discovery Sanctions


The proliferation of electronic data has become a well-documented global challenge to businesses.  The sheer volume of electronic data – e-mails, voice-mails, videos, internet searches, social media, backup tapes, clouds, smart-phone generated data, online journals ("web logs" or "blogs"), instant messaging, etc. – makes management of this data complex, but when you add to that complexity the fact that bytes of information are continually being updated, edited, and changed by different people, effectively controlling compliance risks can become overwhelming.

Failing to manage and maintain electronic data for litigation readiness may not only make it difficult for your company to present its best evidence in court, it can also subject your company to severe sanctions. Court-reported sanctions for electronic discovery abuses cover a broad spectrum, including damaging adverse-inference jury instructions, dismissal of claims, waiver of privilege, and monetary penalties ranging from $250 to more than $8 million. Although the standards courts use to evaluate motions for sanctions for failing to preserve electronic data vary greatly — from mere negligence in some jurisdictions to bad faith in others — your company will be in a good position to defeat a motion for sanctions by showing documented efforts to manage and preserve appropriate electronic data.

Best Practice Tips

  1. Start now: Do not wait for a lawsuit before managing your data. In addition to being prepared for any future lawsuit, management of electronic data may help your company prevent a trade-secret leak or the disclosure of confidential information.
  2. Familiarize yourself: Educate yourself about your company's electronic data systems, including capabilities and limitations. At a minimum, you must know (a) how many different forms of electronic data exist and where they are; (b) who has access to the data; (c) how long the data is stored; (d) when and how the data is deleted; (e) what the back-up systems are; (f) what employees store, if anything, on personal devices; and (g) what metadata you have.
  3. Know the legal requirements: If you do not know what the legal requirements are for your industry, state, or country with regard to the preservation of electronic data, take steps to learn and understand them now. The legal requirements are continually evolving, so be sure your knowledge remains current. If you operate in a variety of states or countries, there may be conflicting jurisdictional obligations that your company will have to address.
  4. Select a custodian or custodians to oversee the data management system: Establish a protocol that identifies who is responsible for overseeing the electronic management system or systems, on a day-to-day basis as well as in response to a litigation hold. Ensure that the custodian or custodians are doing their job properly.
  5. Adopt electronic data management and storage policies: Every company should adopt policies that are simple, clear, and consistent with applicable laws. Include information pertaining to litigation holds in the policy. If employees fail to adhere to the policy, either intentionally or unintentionally, take immediate and consistent action. Policies that are not enforced will not be looked on favorably by the courts. Established policies can not only help your company avoid potential sanctions, they can put you in a position to easily access data that might be exculpatory, or at least supportive of the company in defense of a claim.
  6. Less is more: Your company should develop and enforce a record retention policy outlining what types of data should be kept and for how long. Just because you can store the information does not mean you should. Overburdened storage systems complicate retrieval of data.
  7. Ensure that your litigation hold procedures are in place and working: A litigation hold process must be quickly and easily triggered if it is to prevent the destruction of data and documents. Moreover, make sure that the process works — run mock litigation hold tests to ensure, for example, that auto-deletion systems can be suspended.
  8. Be consistent with training, updating, and auditing: Your electronic data management systems require continual maintenance to ensure that they are up to date. Similarly, be sure your employees are trained and kept abreast of changes in the system. Continually audit the system to ensure that it is able to incorporate new data and technology.

The costs and risks associated with electronic data management are best addressed before a dispute ever arises. Regularly and wisely spending a few dollars and hours can help eliminate the risk of discovery sanctions and decrease the potential for time-consuming discovery demands.

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. For more information on this topic, please contact marketing@jordanramis.com or call (888) 598-7070.


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