Saturday, January 17, 2009

The Importance of ESI in Litigation

Binary Field E-Discovery has become an important topic in litigation in recent years.  As people have moved toward electronic means of documentation and communication, much of what was traditionally found in a paper file such as notes, correspondence, financial accounting, memoranda and the like are now in one or more file formats on a computer or server somewhere.  Not a case goes by these days where a significant portion of the pertinent information is located in a Quickbooks(TM)  file, an Excel(TM) spreadsheet, an email message, or pdf document.

The Federal Rules of Procedure were amended in 2006 to include specific guidelines and requirements regarding Electronically Stored Information or ESI.  While each individual state has its own set of rules governing the discovery process, the Federal Rules are currently setting the standard, as is Federal case law on the issue.

Perhaps the best known opinions on the issue come out of Zubalake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003), 220 F.R.D. 212 (S.D.N.Y. 2003), and 2004 WL 1620866 (S.D.N.Y. July 20, 2004).  This was a gender discrimination lawsuit before the Rules were amended.  The plaintiff believed that there were emails which would show she had been fired for discriminatory reasons.  The defendant produced paper copies of some emails but failed to include certain key emails because they had been deleted or destroyed.   Eventually, the court granted sanctions against the defendant for willfully destroying emails which likely would have related to important facts in the case.

What came out of Zubulake (and now the Federal Rules) includes the duty that the attorneys for parties make efforts to ensure that their clients locate and preserve relevant information which is in electronic form.  The sanction that can be allowed for failure includes an adverse inference regarding the missing information and even the possibility of a default judgment against the offending party.

ESI has become an important part of litigation.  Counsel for parties are now required to make efforts to ensure that their clients can access and produce such information as soon as there is a possibility that the information will be required in litigation.  This has led to what are called litigation freezes regarding both physical information and ESI.

Recently, my firm has been involved in federal litigation regarding this very issue in Smith v. Slifer Smith & Frampton/Vail Associates, et al., No. 06-cv-02206-JLK-MJW, D.C.Colo.  As plaintiffs, we sought ESI regarding a real estate transaction in Vail.  It was determined that such information would likely be on the work and personal computers of a defendant broker.  However, the broker apparently wiped the hard drives of the computers using a wiping software after litigation had begun.  After several months of expert forensic analysis and related motions, the magistrate judge Watanabe issued an order and recommendation which found that the defendant had likely destroyed the relevant ESI.  The judge then recommended that an adverse inference instruction be given to the jury regarding the missing information and that the defendant pay for the cost (including attorney fees) of establishing the situation.  The Order is at Document 111 and is dated January 12, 2009.

The point is that ESI and its management are vital aspects of litigation in the modern age.  It is important to have appropriate policies and procedures in place regarding this form of information and to have counsel capable of properly addressing it should litigation ensue.

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