Electronic Discovery

By MARY SHEDDEN The Tampa Tribune
Published: Feb 9, 2007


TAMPA - File cabinets are going high-tech.

Electronic data have become such a staple in the American workplace that old-school paper documents are being pushed aside in a popular and contentious business arena - the courtroom.

It's been years since civil and criminal lawyers started using e-mail and computer hard drives to prove their cases. Multimillion-, even billion-dollar lawsuits have been decided in part because of the presence or absence of electronic evidence.

But the U.S. Supreme Court recently made the importance of this evidence official. U.S. companies now are required to show that they formally store electronic data in case a lawsuit emerges. The result: a boom for the skyrocketing electronic discovery industry.

"It's been on the verge of exploding anyway," said Craig Luallen, managing partner of Riverview's Computer Forensics, a three-year-old data retrieval company. "The new rules will just expedite things."

Experts estimate that more than 97 percent of all information today was created, stored or transferred electronically. That could include an e-mail, a written document, even a text message sent via cell phone. In corporate lawsuits, the now-virtual paper trail can be more telling than any witness or physical piece of evidence.

For example, a Word document isn't just about the words in the file. It includes embedded details about the true origin of the information, said David Greetham, vice president of electronic evidence for Tampa's First Advantage litigation consultants.

"A massive amount of data is never sent to a printer," he said. "That's clearly a driving force in the rise in the number of cases with electronic discovery."

It's A Booming Business

The increase in the importance of electronic evidence is clear when looking at the growth of the electronic evidence market. It has grown in revenue to $2.423 billion projected for 2007 in 2006, compared with $270 million five years ago, according to the annual Socha-Gelbmann Electronic Discovery Survey.

The federal civil procedure rules don't dictate exactly how the information should be stored - that depends on the type of business operation. Publicly traded companies that report to the Securities and Exchange Commission, for example, already are required to meet stringent electronic storage rules tied to 2002's Sarbanes-Oxley Act.

Tom Meeks, a Coral Gables lawyer and electronic evidence expert, said any company thinking it could be subject to a lawsuit should establish a policy and create a reliable, consistent system for storing and deleting data.

After the fact, retrieving information - or defending why some data were deleted - is far more costly. Just look at financial services giant Morgan Stanley, which in 2005 was ordered to pay more than $1 billion to investor Ron Perlman for not preserving e-mail about their business dealings.

"It can be fatal to a smaller company. It's important to think about these things," he said. "I know they don't expect litigation is coming, but you have to create a system."

Prevention Cheaper Than Correction

Small companies can back up their information with an automated software system, costing as little as $500 to $1,000 for the most basic setup. Backup tapes and hiring a virtual storage facility to store data are among the many options for business owners, Luallen said.

The Morgan Stanley case and similar corporate lawsuits have been the main source of business for electronic discovery specialists, said Tom Gelbmann, a St. Paul, Minn., electronic evidence expert who tracks the industry.

Smaller companies unfamiliar with electronic storage are likely to be more directly affected by the recent rulings, he said.

"If they aren't prepared, there will be a major interruption to the line of business operations" when a lawsuit emerges, he said.

The electronic discovery experts have spent most of their time collecting data after they have been deleted and a lawsuit emerges. The so-called forensic collection is much costlier than setting up a storage system, Greetham said.

Small business owners can't be naive about the role of electronic data, Luallen said. Electronic evidence could be tied to myriad lawsuits. Labor, trademark, intellectual property disputes, even divorce cases can land a company's hard drive in court.

"There's really no litigation where electronic evidence may not be involved," he said.

Reporter Mary Shedden can be reached at mshedden@tampatrib.com or (813) 259-7365.