Electronic Document Retention Rules To Change Effective December 1, 2006
On December 1, 2006 , amendments to Rule 26 and other sections of the Federal Rules of Civil Procedure (FRCP) became effective to address discovery issues that are unique to electronic discovery. The FRCP rules are put into effect by the United States Supreme Court to govern civil procedures in U.S. federal courts. The intent of these amendments is to reduce discovery disputes and costs, and improve discovery efficiency, with respect to electronically stored information.
The changes require companies and other parties involved in federal litigation to produce “electronically stored information” (ESI) as part of discovery, the process by which both sides share evidence before a trial. Specifically, amended Rule 26(a)(1)(b) explicitly identifies ESI as a specific category of information to be described by a disclosing party in its possession and that the disclosing party may use to support its claims or defenses. There is no longer any ambiguity about whether digital data constitutes a “document.” Businesses now have a clear responsibility to produce electronic records.
The new rules have serious implications regarding which records are retained for internal investigations and failure to produce timely information may result in harsh penalties. In fact, under the new rules, an information technology employee who routinely copies over a backup computer tape could be committing “virtual shredding” once a lawsuit has been filed. Some recent high profile cases include the following:
- A jury awarded $800-million in punitive damages when Morgan Stanley repeatedly failed to produce emails in a timely manner. The judge stated that “efforts to hide its emails” were evidence of “guilt.” ( Coleman Holdings v. Morgan Stanley );
- A jury awarded $29.2-million in the largest single sex discrimination verdict in U.S. history after UBS Warburg could not produce copies of relevant emails. The jury was instructed to “infer that the [missing] evidence would have been unfavorable” to the defendant. ( Zubulake v. UBS Warburg ); and
- The SEC imposed a fine of $10-million on Bank of America Securities, the brokerage arm of Bank of America, after they “repeatedly failed promptly to furnish” email and gave “misinformation.”
These amendments will require continuous, ready access to and control of all the electronically stored information that may be relevant to any future litigation. Taking a proactive approach to a prospective electronic discovery request is crucial to avoid potential sanctions and large fines. Jackson & Campbell 's Employment Law Practice Group can assist companies in taking that proactive approach and help design and maintain adequate electronic document retention and E-mail policies to protect your company's interests.
The contents of this Employment Law Alert are intended for general informational purposes only and should not be considered legal advice. Moreover, the mailing of this Employment Law Alert is not intended to create nor does it constitute an attorney-client relationship.
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