Five Rules for Discovery of Electronically Stored Information (“ESI”)

What's one of the most important steps in trying a litigation case? Discovery. Failure to properly discover electronic documents or maintain your client's relevant electronic documents can make or break a case. It can also get you into trouble.

Let's start at the beginning. What is ESI? ESI is any information stored in electronic form. In today’s world, that includes just about everything. ESI can hide in computers, servers, smart phones, tablets, CDs, hard drives, flash drives, and backups. ESI can easily be changed, overwritten or deleted, even without the user’s knowledge. ESI is not static like a physical document is. Destruction of ESI can expose litigants to the possibility of sanctions for spoliation of evidence.

Now that you know why it's important, here's some helpful rules for managing it.

1.     Rule 1 – Remember the Scout Moto: BE PREPARED!

Do not wait until litigation to discuss ESI with your clients.  Being prepared requires the lawyer to have a thorough understanding of all aspects of the client’s ESI, from its creation, to its content, to its storage, to its destruction. Make sure the client has a retention and destruction policy in place and that the client carries out its policy consistently.

2.     Rule 2 – Use “Litigation or Legal Hold” Notices

The first and often the best defense against spoliation sanctions is the Litigation or Legal Hold Notice.

a.     When is the duty to preserve ESI triggered?

Once a party reasonably determines that ESI in its custody or control may be relevant to pending or reasonably foreseeable litigation, the party should take reasonable steps to preserve that ESI. Note that the duty to preserve potentially relevant ESI attaches when litigation is reasonably anticipated – not just when litigation is initiated.

 b.    Determine the scope of the Litigation Hold Notice.

The duty to preserve evidence includes any relevant evidence over which the non-preserving entity had control and reasonably knew or could reasonably foresee was material to a potential legal action.” China Ocean Shipping Co. v. Simone Metals, Inc., 1999 WL 966443 (N.D. Ill. 1999).

c.      Who should get the Litigation Hold Notice?

Does your client outsource any of its ESI functions, such as accounting, payroll, web hosting, etc. or share ESI with third parties? They will need to be on the Litigation Hold Notice recipient list. The person responsible for implementing the litigation hold should get the Notice, not just the client’s contact person who may be managing the litigation. The client’s IT person(s) and HR person(s) should also get the Notice. Put it in writing and require recipients to acknowledge receipt. Send reminders for so long as the litigation hold remains in place. Remove the litigation hold as soon as it is no longer necessary. Send a similar letter to the other side putting it on notice of its duty not to alter or destroy evidence.

 3.     Rule 3 – Collaborate Early on a Mutually Agreeable Discovery Plan

Through discussions with your client, and with an ESI management policy in place, you will have an inventory of the client’s ESI. Try to get the same type of inventory from the other side. Having a good inventory will permit both sides to make an educated and reasonable ESI discovery request.

Be careful what you ask for – you may have to reciprocate. Discovery of ESI can be very expensive. Instead of requesting broad categories such as “all emails,” narrow your request to target particular ESI that you contend is important to resolve the case.

 4.    Rule 4 – Agree on a Process for Dealing with Waiver and Privilege Claims

Because production of ESI normally requires reviewing large quantities of data, there is an increased risk of inadvertently producing privileged information. Have a Non-waiver Agreement with a “claw-back” provision allowing the producing party to “claw back” or undo the production of privileged information. Federal Rule 26(b)(5) sets forth a default “claw back” procedure that can be used in the absence of an separate agreement.

 5.     Rule 5 – Don’t let Spoliation Spoil Your Day

Spoliation refers to the destruction or material alteration of evidence or to the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.

If spoliation occurs during the pendency of the lawsuit or because of the noncompliance with a discovery order, the court can impose sanctions under Civil Procedure Rule 37. Anything from a verbal or written reprimand to default judgment or dismissal of your case is possible. Also within the courts’ authority under Rule 37 is the adverse inference jury instruction.

 By following these five rules, counsel can successfully navigate the dangerous waters of discovery of ESI. Lawyers Mutual offers our "e-Discovery: What Litigation Lawyers Need to Know" handout for additional guidance. If you have questions regarding a specific case, contact a Lawyers Mutual claims attorney for assistance.

 Mark Scruggs is a claims attorney with Lawyers Mutual specializing in litigation, workers compensation and family law matters. You can reach Mark at 800.662.8843 or at mscruggs@lawyersmutualnc.com.