New Federal Law on Electronic Discovery: Are U.S. Companies Prepared?

JMBM Advises Clients to Manage Data Now to Avoid Fines Later

Los Angeles – December 4, 2006 – Federal rules that took effect this month now specifically require litigants in federal court to provide adversaries with relevant electronically stored information. The federal rules have been revised to keep pace with the reality that electronic records have become by far the most prevalent form of evidence in modern litigation. The changes demand early and proactive attention to electronic discovery (e-discovery) and require full disclosure of electronic records and how they are maintained.

"This rule has fiduciary implications for directors and officers of all public companies," said Michael Gold, a partner at Jeffer Mangels Butler & Marmaro LLP (JMBM), a California full-service law firm. Early in 2006, JMBM formed the Discovery Technology Group™ to advise companies on the best way to manage electronic information, particularly during the pre-trial discovery process.

"Information should be looked at as a corporate asset, so a public entity without a plan to protect that asset could violate this law," said Gold, a member of the Discovery Technology Group™.

The rules specify that e-discovery issues be addressed at the earliest stage of court proceedings. Hence, planning and education before any litigation is filed is critical in order to comply and avoid penalties. "Investing now in an effective data retention plan can help a company be prepared for any future litigation," said Discovery Technology Group™ partner Dan Sedor. "Such a plan will usually cost significantly less than a court settlement."

The rules also provide a complex method of shifting e-discovery costs associated with "inaccessible" electronic records – such as backup tapes – and a limited safe harbor for litigants whose good faith operation of their recordkeeping systems results in the loss of electronic evidence.

According to JMBM’s Discovery Technology Group™, some key steps companies can take include:

  • Complying on an ongoing basis with regulations requiring records retention;
  • Preparing ahead of time to respond to requests for electronic information in litigation;
  • Putting in place an IT system that supports these goals while still providing an efficient and cost-effective infrastructure.

"Companies need to take critical steps now to harmonize their IT systems with the new federal requirements. Pro-active pre-litigation data management is key," said Discovery Technology Group™ partner Stanley M. Gibson, who used e-discovery in 2004 to obtain a $570 million jury verdict for JMBM’s client, Gary K. Michelson M.D., in Medtronic v. Michelson.

The Discovery Technology Group’s™ lawyers have the sophistication and experience needed to learn and understand their clients’ recordkeeping systems, to meet and use the new early electronic evidence disclosure requirements to their clients’ advantage, and to design, implement and audit policies that will help their clients navigate the new accessibility and safe harbor rules.

The Group’s members were the only lawyers commissioned by Washington, D.C. publisher Bureau of National Affairs (BNA) to prepare a guide to electronic records retention. Furthermore, the Group’s members speak frequently at industry events, including the Practising Law Institute®, Forbes Conference, and the AIIM Expo and Conference. For more information, visit JMBM.com/DTG.