Digital Documents and Lawsuits

28 October 1999
You may think that the fastest way for your computer to become your enemy is for it to freeze right before you save an important document. Well, that's the second fastest way. The fastest way, and the time you may learn to hate your computer even more, is the day you're sued. This column is a warning that you may have to share what's on your computer with the people who are suing you. It will also talk about strategies for minimizing the damage.

Let's face it, it's the American way. Whatever type of business you're in, there's a good chance that you'll be sued at some point. When you're sued, you can expect that digital data will play a part in the litigation. It may be admitted into evidence at trial or exchanged as a part of discovery.

There's no question that digital data is discoverable in litigation if it's relevant or could lead to admissible evidence. "Discovery" is the part of litigation when the parties exchange depositions, which are sworn oral statements, documents and other things. Essentially, it's forced information sharing.

Discovery of digital data is important because much of the data that exists in a business exists only in a digital format. Draft versions of final documents and e-mails are but two examples of documents that may exist only on the computer.

The new world of litigation in the computer age places the business responding to aggressive discovery in a series of dilemmas which can only be resolved by careful coordination between counsel and corporate administration.

The end game of computer discovery is to generate a digital version of the opposing side's relevant data. This is especially important because digital data is more easily analyzed than paper documents. The more digital data a party can obtain, the better.

Gold mine or Minefield?

Let's count the ways your computer can kill you in a lawsuit. If you're like most businesses, you computers store your trade secrets and other proprietary and confidential materials. These are things you'd probably don't want to see in the newspaper or discuss in a courtroom.

Your computer probably also stores communications with your lawyer that are privileged and materials created in anticipation of litigation, which are covered under the attorney work-product immunity.

If you want to minimize the chances of seeing your trade secrets discussed in open court, you need to be working with intellectual property counsel today. Don't wait until you can see a lawsuit coming. You need to develop a trade secret policy for your company now.

Information is not a trade secret just because you say it is. There are specific steps that you must take to insure that courts will recognize your proprietary information as a trade secret. Your trade secret policy will tell you those steps.

Another potential problem area in digital discovery is communications protected from disclosure by the attorney-client privilege. Clearly, confidential communications between counsel and client are privileged from discovery, but you can accidentally waive the privilege through inadvertent disclosure.

This presents a particular problem in the disclosure of digital information because of the sheer volume of disclosure involved. You must set up procedures to avoid inadvertent disclosure. These procedures should include not giving the other side documents, digital or otherwise, until your counsel has reviewed it.

"Attorney Work Product" immunity involves materials that have been prepared in anticipation of litigation. Work-product immunity gives you limited protection, which may be pierced if the other side has a substantial need for the materials and cannot recreate the information without undue hardship.

In this area, databases created in anticipation of litigation, like those relied upon by experts, are particularly vulnerability. For example, let's say that your company created a database for use by your expert to help the company defend itself against an employment discrimination charge. It is work product and as such protected, but once your expert relies upon it, it may be discoverable.

E-mail is another area that can haunt you in litigation. While people are careful of what they say in writing "for the record," they seem to feel that e-mail doesn't count. This feeling that it does not count goes so far that people say things in e-mails they would never say in person or by telephone. Well, they're wrong. E-mail does count. Not only are e-mails subject to discovery, but they can kill you in a courtroom.

Your businesses should have an e-mail policy in place. You might consider rules like no e-mail may contain derogatory information about individuals or the competition. This may have helped Texaco avoid the class action payment it made to settle a discrimination suit, or Microsoft avoid the antitrust results of a "we shall bury Netscape" e-mail.

Destroying Data

In the face of potential litigation, people often attempt to delete "troublesome" computer files. Depending on the facts in your particular situation, this may be illegal. More, it may cost you the case. You'll need your lawyer to counsel you on this before you act.

Whatever you do, you need to be aware that when you delete a file from a computer, it may still be recoverable from your hard drives or archived data files. Attempted deletions may help create the inference that you thought you were guilty.

Courts have held that once somebody has sued you or you have a reasonable belief that a suit is impending, you're under a duty to preserve what may be reasonably relevant to the action. If digital data is reasonably relevant, or may lead to relevant information, it must be preserved too.

Dynamic Data

One of the problems with digital data is that it's often dynamic. Information is continually overwritten with new information. Still, failure to maintain the information may result in sanctions, and if the court thinks that the situation is egregious enough, the court could enter a judgment against you.

Therefore, once you think that you may be sued, one of the first things you must consider is how to handle the digital information that may be the subject of discovery. Your counsel should advise you on how to preserve existing computer data and to disable any automatic procedure in the computer system that could destroy relevant evidence. Further, electronic data should be included in the corporation's document retention policy.

Your record retention program for computerized data must contain several components. First, you must determine what types of files you have and where you keep the records. Next, you must decide which media or combination of media are appropriate for the storing the information.

You should create a committee consisting of your attorney, computer experts, department heads and the people who will manage the system. Since this area is a legal minefield, your counsel should develop the record retention schedule.

Finally, you must destroy on a consistent basis as mandated by the plan. This is essential if your plan is to pass muster as a legitimate record retention program. You should destroy records as a regular course of business, on the last day of every month.

Be aware that if you engage in the one time destruction of selective documents outside the retention policy, a court will likely view your action with suspicion.

Expertise Needed

Digital discovery is not for the uninitiated. Those who don't have a comprehensive working knowledge of modern computer systems and software should consult those who do. You'll need an expert to assist you on this.

Digital discovery has created an entire new world of considerations in litigation. It's not a world into which you should go with closed eyes, hoping for the best. Inadvertent disclosure may destroy your company's unique marketing and products.

Before any of this happens to you and before litigation is imminent, you should have a legal audit conducted on your corporate computer systems and your records retention program. Otherwise, this brave new world of digital discovery may be a very painful experience for your corporation.

Mark Grossman's "TechLaw" column appears in numerous publications. Mark Grossman has extensive experience as a speaker as well. If you would like him to speak before your group or corporate meeting, please call (305) 443-8180 for information.

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