Document Retention, Electronic Discovery, E-discovery Cost Allocation and Spoliation of Evidence: the Four Horsemen of the Apocalypse in Litigation Today
| Jurisdiction | Connecticut,United States |
| Publication year | 2021 |
| Citation | Vol. 80 Pg. 331 |
| Pages | 331 |
80 CBJ 331. DOCUMENT RETENTION, ELECTRONIC DISCOVERY, E-DISCOVERY COST ALLOCATION AND SPOLIATION OF EVIDENCE: THE FOUR HORSEMEN OF THE APOCALYPSE IN LITIGATION TODAY
I. INTRODUCTION
The retention of documents and their production in litigation or regulatory investigations has always presented a dilemma for the large corporation and its counsel. The practical considerations of the prodigious cost, space, and human resources associated with retaining and storing great volumes of documents was always in tension with the requirements of the applicable court or regulatory agency rule requirements to preserve - and never alter or destroy - what might ultimately be considered relevant to the issues in the litigation or investigation. That dilemma has been exacerbated a thousandfold by the advent and spread of the electronic storage and transmittal of documents and information in the business world.
What was always a burdensome problem demanding an inordinate amount of attention and resources has now become an undertaking of monumental proportions spawning a new industry of information technology forensic experts, generating serious and debilitating litigation entirely separate from and collateral to the primary lawsuit; and creating exposure to draconian sanctions and other remedies for noncompliance. This is the brave, new world of electronic document retention and e-discovery.
This article will address the four primary components of this issue: (1) document retention policies and requirements; (2) e-discovery; (3) cost allocation of e-discovery; and (4) spoliation of evidence and its consequences. The existing and proposed federal rules applicable to these topics, the "best practices" suggested by the ABA and other organizations, and the latest applicable case law will all be examined for guidance.
* Both of the Hartford Bar.
II. RETENTION OBLIGATIONS: BEING PREPARED FOR WAR
Regardless of one's level of computer sophistication, the terms byte, kilobyte and megabyte - even gigabytes - as references to the size of a computer file are familiar and stand as evidence that our cultural perspective on measuring the size of a document has shifted from the number of pages to file sizes measured in bytes.
A 2003 University of California Berkeley study estimated that five exabytes of information were created in 2002.(fn1) An exabyte, to put it in perspective, is 1,000,000,000,000,000,000 or 10(fn18) bytes. Ninety-two percent of the five exabytes of information created in 2002 was stored electronically.(fn2) That statistic, now four years old, is staggering and means that, based on pure volume alone, the discovery of electronically stored information changes the face of litigation. Consider the following quote from the Judicial Conference Committee on Rules of Practice and Procedure made when approving the proposed amendments to the Federal Rules of Civil Procedure addressing electronic discovery issues:
Electronically stored information is characterized by exponentially greater volume than hard-copy documents. Commonly cited current examples of such volume include the capacity of large organizations' computer networks to store information in terabytes, each of which represents the equivalent of 500 million typewritten pages of plain text, and to receive 250 to 300 million e-mail messages monthly.(fn3)
As the digital age continues to evolve, the need for com-
1 Peter Lyman & Hal R. Varian, How Much Information 2003, available at http://www.sims.berkeley.edu:8000/research/projects/how-much-info-2003/execsum.htm. According to the UC Berkeley study, five exabytes, "If digitized with full formatting, the seventeen million books in the Library of Congress contain about 136 terabytes of information; five exabytes of information is equivalent in size to the information contained in 37,000 new libraries the size of the Library of Congress book collections."
2 Id.
3 Report of Judicial Conference Committee on Rules of Practice and Procedure, September 2005 at 22-23, available at http://www.uscourts.gov/rules/Reports/ST09- 2005.pdf. (Emphasis added). See also Shira A. Scheindlin & Jeffrey Rabkin, Outside Counsel: Retaining, Destroying and Producing E-Data: Part 2, N.Y.L.J., May 9, 2002, at 1 (2002) ("Consider, for example, e-mail messages saved on a computer hard drive. In 1994, Americans collectively sent 100 million e-mails daily, and that number rose to 500 million e-mails per day in 1998. Research indicates that in 2002, Americans will send 1.5 billion e-mail messages every day.")
prehensive internal document retention policy must evolve in lockstep.
A. Sources of Retention Requirements
There are two competing forces that should guide a company's document retention policy - a company's operational structure, and what the law requires. In terms of electronic information retention, each individual organization's structure and business will dictate the policy. The types of electronic information the organization generates, the format of electronic information, how the organization uses electronic information it generates, and how it stores and archives that information will shape the retention needs. To augment the policy, companies can look to special trade and service organizations such as the Association of Records Managers and Administrators,(fn4) the American National Standards Institute,(fn5) and the International Organization for Standardization(fn6) for guidance on electronic data retention requirements and standards. But organizations must also look to applicable law to shape their retention policy.
Generally, the legal duty to retain arises in two contexts. There are those retention duties set forth in statutes and regulations, and there is the overarching duty to retain relative to potential, anticipated or actual litigation.
1. Statutory & Regulatory Duties To Retain(fn7)
In 2002, President Bush signed the Sarbanes-Oxley Act into law.(fn8) Sarbanes-Oxley imposed new requirements on
4 See http://www.arma.org/erecords/index.cfm. The ARMA website even offers on-line courses on electronic discovery free to its members.
5 See http://www.ansi.org, publishing the ANSI Audit Checklist for Electronic Records. This document contains suggestions to facilitate electronic record maintenance and a checklist to assist ANSI-accredited standards developers with the organization of electronic files within the context of the ANSI Audit Program requirements.
6 See http//:www.iso.org. ISO Technical Report 18492 (Long-Term Preservation of Electronic Document-Based Information) "provides practical methodological guidance for the long-term preservation and retrieval of authentic electronic document-based information, when the retention period exceeds the expected life of the technology (hardware and software) used to create and maintain the information."
7 This article addresses only duties set forth in federal statutes and regulations. 8 116 Stat. 745 (2002).
public companies and their accountants and auditors for retention and destruction of certain financial records. Two sections of Sarbanes-Oxley pertain to the retention and destruction of electronic documents, and impose serious criminal penalties under certain circumstances.(fn9)
Section 802 amends the federal obstruction-of-justice statute(fn10) by adding two new offenses. An individual who "knowingly" alters, destroys, mutilates, conceals, covers up or falsifies "any document or tangible object" with the "intent to impede, obstruct or influence" an investigation or proceeding of any matter within the jurisdiction of federal agencies or bankruptcy proceedings shall be fined, or imprisoned not more than 20 years, or both.(fn11)
Section 802 also requires accountants to "maintain all audit records or to review workpapers for a period of 5 years from the end of the fiscal period during which the audit or review was concluded."(fn12) This section also requires the Securities and Exchange Commission (SEC) to promulgate rules and regulations relating to the retention of relevant records from an audit or review;(fn13) makes it unlawful to knowingly and willfully violate these new provisions, including any SEC Regulation promulgated thereunder; and imposes fines, a maximum 10-year prison sentence, or both.
Section 1102 expands the obstruction-of-justice statute prohibiting tampering with a record or otherwise impeding an official proceeding.(fn14) Whoever "corruptly" alters, destroys, mutilates or conceals a record, document or other object, or Ã---------Ã
9 See Title IX of Sarbanes-Oxley, the "Corporate and Criminal Fraud Accountability Act of 2002."
10 18 U.S.C. § 1501 et seq.
11 18 U.S.C. § 1519.
12 18 U.S.C. § 1520. SEC Rule 2.06 promulgated pursuant to this section actually increases the retention requirement to seven (7) years.
13 Id. See also Regulation S-X, Rule 2.06, which requires accountants to "retain records relevant to the audit or review, including workpapers and other documents that form the basis of the audit or review, and memoranda, correspondence, communications, other documents, and records (including electronic records), which (1) are created, sent or received in connection with the audit or review, and (2) contain conclusions, opinions, analyses, or financial data related to the audit or review" for seven (7) years. (Emphasis added).
14 See Title XI of Sarbanes-Oxley, the "Corporate Fraud Accountability Act of 2002" amending 18 U.S.C. § 1512.
attempts to do so "with the intent to impair the object's integrity or availability for...
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