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How will eDiscovery affect companies?

by on October 29, 2008

The amendments to FRCP have effectively thrown together IT and legal departments as strange bedfellows in the search for compliancy solutions.  While other pockets of a company (HR, accounting, special compliancy groups) are genuinely affected, it is the legal and IT departments that must join hands to protect the company from fines or sanctions.  The insistence of Rule 26(f) that parties meet early on to discuss relevant issues regarding discoverable information, not only makes every litigious action a potential eDiscovery case, but puts the onus on general counsel to fully understand and be able to articulate the company’s policy regarding their electronically stored information systems.  IT and legal must speak the same language to have a shared understanding of what data is stored, where it is stored, and for how long.

The problem with reaching this compliancy goal is twofold.

First, companies need to have established retention policies (and active methods) as well as accessibility procedures.  In fact, Rule 26(a)(1)(B) asserts that companies should have in place the ability to identify and access stored information to produce it for discovery; specifically that this system should be in place before the discovery request is made. This is where IT and legal must first team up to ensure that their company is compliant and eDiscovery-ready before the threat of litigation ever arises.

Secondly, companies must address the time-consuming and expensive process of accessing their offline electronically stored information (ESI). The initial cost of implementing a reliable data management system that allows for tracking and retrieval of ESI is money well spent. The alternative is the potential for stiff fines, sanctions, or the exorbitant cost of outsourcing retrieval of electronic data, requiring an outside vendor to sift through unknown quantities of ESI, identify what is relevant, retrieve it, and restore it to a usable format. Certainly this can be done, but at great cost and at the risk of a vendor overlooking pertinent data.  Companies may even choose to settle a lawsuit that otherwise might have gone to (and been won) in court, simply due to prohibitive eDiscovery costs. Not only is outsourcing the process expensive, but it must be done each time litigation looms. Companies facing multiple lawsuits will find it more cost-effective to implement in-house solutionsto manage and retrieve offline data in order to be eDiscovery ready.

Yet another valid concern is the risk incurred by allowing an outside vendor access to ESI, some of which may be protected by HIPAA or other privacy regulations, thus raising a host of privacy concerns, not to mention potential identity theft opportunities.

So what will this mean to your bottom line? We’ll talk about that in my next post.

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