The volume of electronically stored information (“ESI”) in companies is reaching levels previously unimagined in a paper world and, with the increasing adoption of technology, all indications suggest continued growth at rapid rates. To mitigate both risks and costs, companies are challenged to exert control over this ever-growing amount of information ebbing and flowing through their technological environment. From a litigation perspective, a particular challenge is curtailing the ballooning costs of the electronic discovery process, which involves reviewing, restoring, and producing relevant information in a timely manner. But these costs, in some measure, are within the control of the company and can be managed through the exercise of a sound information governance program. Failing to proactively take these measures can lead to financial ramifications—a lesson recently reinforced by the United States District Court for the District of Nevada in United States ex rel Guardiola v. Renown Health (August 25, 2015).
Pertinent to this discussion, Guardiola filed a motion to compel seeking emails from a certain time frame (“gap emails”) that were missing from Renown Health’s (“Renown”) production of information during the discovery process. Renown resisted the motion. In support of its position, Renown explained that it lacked any email retention policy until April 2011, when it retained the services of Arcserve, a backup solution system. At that time, Renown also adopted an email retention policy which declared emails older than six months as inactive, upon which time they were transferred and stored solely on backup tapes. Because, by their nature, backup tapes are generally not organized for retrieval, Renown argued that the missing emails were not reasonably accessible per se, basing its position on a line of case precedent. In addition, Renown argued that restoring the tapes containing the missing emails would result in undue costs. Specifically, Renown estimated that the restoration of those tapes would cost at least $248,000, which included the costs of outsourcing the work to its third party vendor for data processing and contract review process.
The court reviewed the line of cases cited by Renown for the position that backup tapes are not reasonably accessible and found that the media in which the data is kept, alone, is far from dispositive. Instead, the court opined that the determination of undue burden is fact-specific and no format is deemed inaccessible per se. In this case, the court noted that Renown previously produced emails that were restored from other backup tapes, thereby demonstrating that it was technologically feasible to restore and produce the emails. Additionally, as Renown would be relying on a third party vendor to restore the emails, the court found the company failed to demonstrate the requisite burden stating that, “there will be a burden or cost, but not both.” With respect to undue costs, the court noted that the restoration costs were an “infinitesimally” tiny portion of Renown’s annual revenues. Accordingly, the court rejected Renown’s arguments and granted the motion to compel.
Interestingly, during its cost analysis, the court recognized that ESI “is now a common part and cost of business.” As such, the retention practices of the business, as well as decisions on how to store data, have implications that need to be carefully considered in light of the “risk of litigation and corresponding discovery obligations.” For support, the court cited to AAB Joint Venture v. U.S., for the premise that a party should not be relieved of its duty to product documents merely because it has chosen a means to preserve evidence which makes ultimate production of relevant documents expensive. Further citing to that case, the court noted that to permit a party to reap the benefits of a chosen technology, while at the same time using that technology as a shield in litigation, would lead to a result that is both incongruous and unfair. Based on the foregoing, the court determined that Renown must bear some responsibility for its failure to implement a sensible email retention policy and its choice to use an archival/backup solution that did not maintain ESI in an indexed or otherwise searchable manner.
While the decision in this case is fact-specific, it is instructive, and the lessons contained therein should be heeded for those managing electronic information. So, how do you control the costs of the electronic discovery process and avoid the problems Renown faced?
Understand the difference between backup, disaster recovery, and archiving. If a copy is truly for purposes of a backup or for disaster recovery, then it should reflect data already contained elsewhere and arguably not subject to discovery requests. Archiving, on the other hand, holds original data that are presumably being preserved for a business purpose. Settle on the lexicon, define it, and communicate it.
Do not commingle archive data with backup or disaster recovery tapes.
Lastly, implement a sound retention policy and follow through with it. Whether it is email or other electronic data, retaining information past its life cycle only creates more data to store and sift through, resulting in more costs.
Business decisions impact the cost factor of e-discovery. Taking these steps will help you mitigate the potential costs of the electronic discovery process and give you a little more peace of mind.