U.S. companies will need to know more about where they store e-mails, instant messages and other electronic documents generated by their employees in the event they are sued because of changes in federal rules that took effect Friday, legal experts say.
The changes, approved by the Supreme Court's administrative arm in April after a five-year review, require companies and other parties involved in federal litigation to produce "electronically stored information" as part of discovery, the process by which both sides share evidence before a trial.
Federal and state courts have increasingly been requiring the production of such evidence in individual cases. The new rules clarify that the data will be required in federal cases.
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, said Alvin F. Lindsay, a partner in the Miami office of Hogan & Hartson whose legal expertise is in technology and litigation.
Companies still could routinely purge their archives if the data aren't relevant to cases the companies have pending or expect to face, though specific sectors such as financial services remain governed by other data-retention rules.
The new rules make it more important for firms to know what electronic information they have and where, especially because of a provision that requires lawyers to provide information much earlier than before on where clients' data are stored and how accessible they are.
Besides e-mail, companies will need to know about things more difficult to track, such as digital photos of work sites on employee cellphones and information on removable memory cards, said James Wright, director of electronic discovery at Halliburton Co.
There are hundreds of "e-discovery vendors," and these businesses are raking in about $1.6 billion in 2006, Wright said. That could double in 2007, he added.
Although electronic searches can help narrow the amount of data, Lindsay said, some high-paid lawyers still will have to sift through casual e-mails to find relevant information.
But Martha Dawson, a partner at Seattle-based law firm Preston Gates & Ellis who specializes in electronic discovery, said companies would not have to alter how they retain their electronic documents. Rather, she said, they will have to do an "inventory of their IT system" to know better where the documents are.