Electronic Evidence Newsletters

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Who's looking after our electronic information?
Martin Carey, Managing Director, UK Region

Today’s modern society brings many challenges. As an example, in the normal course of business, any one professional can send and receive upwards of 100 e-mails per day. For small and large companies alike, this amount of electronic information can be difficult to store and manage. The concept of a company’s electronic information has even taken on its own mantra, becoming commonly known as ESI or electronically stored information. Further more, as the legal profession continues to modernise and adapt to their clients’ needs, their knowledge on how to counsel on identifying, capturing, reviewing and producing electronic information as evidence is paramount.

In late 2007, we conducted a survey of companies in the UK and US to get a better understanding of their preparedness and understanding of these issues. This survey, the “ESI Trends Report” is the first of many to come aimed at helping today’s lawyers and internal legal departments better arm themselves during an internal investigation, regulatory matter or litigation.

While many of the statistics that came out of this inaugural survey were unsettling, they were not surprising to us at Kroll Ontrack. Everyday, we are meeting with leading law firms and companies throughout the UK and hear firsthand their struggles with ESI. From changing rules to lack of policies and non-commitment to lack of training, ESI is posing an ever changing and difficult issue to deal with.

Most notably, consider the following statistics:

Only 25% of US in-house counsel claim to be fully up-to-speed with all case law, developments and regulations relating to ESI, and an even smaller percentage (17%) of in-house counsel in the UK claim to be fully up-to-speed.

Approximately half of respondents in the UK and US do not have any ESI policy.

• Almost half of US in-house counsel, and a quarter of UK in-house counsel, state their in-house legal department has primary responsibility for ESI strategy development. Survey respondents not choosing in-house counsel for this question selected C-level, HR, Compliance and various other departments relatively evenly.

• Respondents in the UK and US state that the CEO or Board should bear the brunt of responsibility in the event that their respective ESI policy results in governmental fines, court imposed sanctions, or reputational damage. However, a large percentage of in-house counsel responding to the survey stated to not know who should bear responsibility for ESI sanctions.

• Nearly three-quarters of in-house counsel in the UK and US state that they lose time due to inefficient or non-existent ESI procedures.

• Almost half of the US respondents and a third of UK respondents feel that the judiciary is not adequately educated in ESI developments. Furthermore, a large percentage of survey respondents in both countries state that they do not know the judiciary’s level of knowledge on ESI issues.

• The majority of respondents in the UK and US state that there is some financial impact from inefficient ESI procedures.

• UK and US respondents cited several challenges in executing on ESI policies, with lack of time and ownership as the top two reasons in both countries.

• UK and US respondents cited several ESI challenges in the next five years. Most notably, the biggest challenge cited in the US, unmanageable volume, was near the bottom of challenges cited in the UK.

So what does all this mean? Unfortunately, the overriding theme is lack of accountability, responsibility and understanding. It is startling that nearly half of all companies, large and small, do not have a policy in place with regards to how to deal with ESI. Whether that is because they do not deem it important enough, they don’t believe it is their responsibility or they just don’t know what should be in such a policy is undetermined. However, given that most companies recognise the fact that they lost time and money due to the lack of a policy points to lack of knowledge and responsibility.

Today’s in-house legal teams are looked to for sound counsel and advice by the C-suite executives and the Board. But given these statistics, they may just be missing a major issue. As electronic communication continues to grow and become more complex, more and more investigations and litigation matters will require an accurate response.

Critical evidence lies in computers, servers, thumb drives and mobile phones. While most IT departments are able to assist in understanding their overall infrastructure, the responsibility should never lie solely with them. They should always be included in the discussion and development of a response, but their knowledge of legal issues and possible evidence handling protocols may be slim.

Hundreds of cases in the US and a growing number in the UK have revealed the consequences of electronic document scandals over the last decade. Additionally, our survey proved that incorrect handling of ESI in litigation and investigations leads to a number of serious repercussions for organisations. In litigation, this includes disclosure sanctions, fines and lost cases for not following the UK Civil Procedure Rules and the US Federal Rules of Civil Procedure. More serious sanctions are played out in the media and on the stock exchange as reputational damage can lead to financial struggles for organisations making severe ESI missteps.

Despite the incumbent threat to organisations and the Board, our research shows that many are still failing to take the threat of data mishandling seriously and are not implementing company-wide policies to adhere to their duties under the law. Often the Board is unaware of its responsibilities around ESI and even when there is some understanding, only a minimal ad hoc approach is put in place. This can leave an insufficiently trained and under-prepared IT or in-house legal team to deal with the complex issues without appropriate resources. At best, these organisations are struggling to keep pace with their competitors in the marketplace and are finding themselves playing a never-ending game of ESI catch-up.

The bottom line is that it is the senior decision makers within organisations who need to take ownership of this issue and ensure that a multi-disciplinary ESI team works together to develop a policy and enforce it enterprise-wide. If businesses continue to show lack of leadership and focus in this area, an increasing number of will find themselves at the sharp end of regulation, unnecessarily at a disadvantage in legal proceedings and potentially under threat from severe legal damages.

However, all hope is not lost for those seeking to change their ESI destiny. There are many success stories across all industry sectors – finance and banking, pharmaceuticals and medicine, transportation, energy, and many more. Companies that choose to take control of their ESI practices are emerging stronger and better equipped to protect their informational assets. More importantly, they realise substantial time and cost savings when it comes to collecting, reviewing and producing electronic data in litigation or investigations.

As case law and regulations develop, look for more training and information on the ESI issue. This report will become an annual barometer and litmus test for in-house legal teams. We hope this year’s makes you take heed.

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