Tips for Managing Electronic Document Costs in Litigation
When project claims are pursued in litigation, contractors are often blindsided by the costs associated with the review and production of electronically stored information (ESI), including contract documents, emails, photographs, text messages, and other electronic communications. These costs can force contractors into undesirable settlements to avoid further expensive litigation. Adding to this burden is the fact that courts are now issuing sanctions against contractors and their attorneys for failure to properly produce their ESI. In recent years, courts have issued individual sanction amounts ranging from $637,612.50 for failure to obey a court order for an independent inspection of available electronic information to more than $1 million for spoliation (destruction of evidence). Other penalties include barring evidence and dismissing claims, and in one case, threatening to hold parties in contempt.
Given the pervasiveness of electronic documents, courts now expect counsel and their clients to understand ESI and how it applies to lawsuits. One court specifically notes that “[e]lectronic discovery requires cooperation between opposing counsel and transparency in all aspects of preservation and production of ESI … It is time that the Bar—even those lawyers who did not come of age in the computer era—understand this.” (William A. Gross Constr. Assocs., Inc. v. Am. Mfrs.Mut. Ins. Co., 2009 WL724954 (S.D.N.Y. Mar. 19, 2009)).
Three ways in which contractors can reduce exposure to sanctions and the costs associated with collection, review, and production of ESI are: (1) implementation of clear electronic document management policies, (2) early identification and preservation of project records once litigation is reasonably foreseeable, and (3) coordination with employees and attorneys regarding the scope and format for document production.
Effective electronic document management policies clearly define acceptable methods and means for project communication, including the use of social media, company phones, and email. In litigation, the policies are used to help narrow the scope of documents and ESI subject to review and production and reduce litigation costs. For example, employees may communicate with field personnel through emails, text messages, or even social media. Each form of communication adds additional costs to the collection and review process that takes place when a lawsuit ensues. Best practices suggest that contractors should limit the forms of communications their employees and subcontractors use.
More importantly, a clear policy identifies the duration for preserving each type of electronic document upon project completion. Some documents, such as project finance records, must be saved for periods of time dictated by tax statutes. Other documents may be stored longer based on statutes of limitation or repose. Some generic documents may be stored for a period of time based solely on the costs for storing and retrieving those documents. And simply establishing a policy is no longer sufficient to persuade courts that a party has complied with its discovery obligations. Parties must also be prepared to prove that they have consistently enforced the terms of their policies.
RULES OF EVIDENCE
The established rules of evidence require that once litigation is reasonably foreseeable to a party, that party is obligated to ensure that all relevant documents in its possession or control are maintained and available for use by all parties during the lawsuit. In meeting this obligation, a party must show that a “litigation hold” or “document preservation notice” was distributed to all executive personnel to preserve the records. The litigation hold asks individuals to identify and help maintain specific documents that may be in their possession. Once a litigation hold is issued, contractors should consider meeting with key personnel to discuss those documents that project personnel may have and the location of those documents. Contractor’s counsel should also be present at such meetings as courts are now requiring attorneys to have a personal working knowledge of the types and locations of documents maintained by their clients. In disputes involving the production of electronic documents, attorneys are no longer allowed to simply rely on their clients to preserve and produce potentially responsive documents.
Lastly, contractors need to follow up with their project personnel and their attorneys about the types and formats of documents being produced. Generally, a party is allowed to produce documents, including their electronic documents, in the manner in which they are typically stored. If a party cannot produce the documents in that manner, then the documents must be produced in a reasonably useable format. To save on costs, attorneys need to know the different types of file formats available for a clients’ collection and how those documents have been stored. Using that information to reach early agreements with opposing counsel will reduce the number of post-production disputes and allows parties to avoid the significant costs of reproduction or reformatting the production at a later date.
It is difficult to forecast which project disputes will turn into lawsuits. Contractors who effectively manage their electronic documents will ease the burden of discovery in litigation and significantly control related costs. ■
About The Author:
Patrick “Gene” Blanton is a construction attorney in the Dallas office of Ford Nassen (www.fordnassen.com), which is nationally recognized in the industry and is one of the largest construction law firms in Texas. He oversees the firm’s E-discovery practices and his practice involves preparing contract documents and counseling on business and legal issues that arise during construction projects, as well as risk management and dispute resolution through negotiation, mediation, arbitration, or litigation. He can be reached at email@example.com or 214.523.5118.
Modern Contractor Solutions, April 2013
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Tips for Managing Electronic Document Costs in Litigation