By Patrick E. Gaas & Tiffany Harrod
Coats | Rose
Construction companies are continuously adopting new technologies to facilitate productivity, remote communications, and improved safety. However, these new technologies also increase the amount of electronic data stored on hard drives, servers, clouds, Building Information Modeling (BIM) systems, smart phones, iPads, and laptops, which in turn increases the cost of e-discovery. Modern electronic document management plans provide the necessary tools to control these costs in the event of arbitration or litigation. Implementation of upfront retention and deletion plans can help prevent potentially enormous downstream e-discovery costs.
Electronic Discovery Costs
E-discovery costs are directly related to the amount of data retained and reviewed. Recently, the RAND Institute for Civil Justice1 issued a detailed report on e-discovery titled, “Where the Money Goes: Understanding Litigant Expenditures for Producing Electronic Discovery.” This study found that on average, each gigabyte of data represents approximately $18,000.00 in e-discovery costs. On a per-gigabyte basis, costs ranged from $125 to $6,700 for the collection of data, from $600 to $6,000 for processing electronic data, and from $1,800 to $210,000 for the legal review.
Overall, the most expensive part of e-discovery is the review phase where individual documents are looked at for relevance and privilege and this cost is not likely to change because of the human factor involved in document review. The RAND survey found that “given the trade-off between reading speed and comprehension, especially in light of the complexity of documents subject to discovery in large-scale litigation, it is unrealistic to expect much room for improvement in the rates of human review.” While it only costs about $.20 a day to buy one gigabyte of storage, it costs much more to have the stored data reviewed in the event of litigation. Thus, taking steps to establish a process and procedure for retaining only necessary data and deleting unnecessary data will reduce costs by reducing each gigabyte of data that needs to be reviewed.
What Records Are You Required To Keep?
Current laws hold companies responsible for managing their electronically stored information (ESI) both before and during litigation. State and federal laws do not require companies to keep all email communications or ESI, but rather, require companies to be able to suspend their records destruction policies in the event of litigation. Thus, from a preservation standpoint, when faced with potential litigation, laws require litigants to hold all potentially relevant ESI, and to produce all responsive, non-privileged ESI pursuant to a discovery request. Failure to hold and produce all discoverable ESI could result in sanctions ranging from attorneys’ fees and costs to adverse inference jury instructions or even a default judgment.
Sanctions are based on the expectation that companies manage their electronic data and are able to control what data is stored and deleted. Therefore, it is necessary for companies to create and enforce a policy that addresses the retention and destruction of ESI. Having a proactive records management plan in place will create a defense to any claims that records or ESI have been lost or illegally destroyed. Without a policy, the courts will presume that all electronic information is stored indefinitely. Because of the proliferation of electronic communications and the costs of reviewing ESI, no one should adhere to a policy of retaining all electronic data.
Proactive Records Management
Since construction litigation is typically project-based, companies have the opportunity to manage electronic data to some extent on a project basis; other non-project specific documents can be effectively managed as well. In either instance, significant cost savings associated with the review of unnecessary data can be realized. Local counsel should be consulted since there are few absolute rules regarding what needs to be preserved, or for what time period. Consider the following suggestions:
Classify Project Documents
Classify project documents as “temporary” or “permanent” and establish a retention period for each.
Consider the applicable statutes of limitation and repose for all potentially applicable jurisdictions.
Determine which records are required for audits or government inquiries, along with the examination periods related to each.
Be sure to consult all project contracts for document retention requirements.
Create A Written Policy that Includes All ESI and Enforce and Audit the Policy
Know what is being stored, where it is stored, and set a timetable for keeping and destroying electronic data.
Educate all employees on the retention and destruction policy and periodically conduct compliance audits to ensure that employees are following the policy. Regularly review the policy for effectiveness, revising as needed.
Talk to IT Professionals About Software Decisions and Destruction Policies
Talk to IT professionals about the software used by the company and the lifespan of the software. It is important to be able to access ESI in the event of litigation. When faced with the obsolescence of certain software, records must either be migrated to new versions or the old hardware and software must be retained in order to read the records. Assess the company’s software decisions annually for potential data retention issues.
Work with technology professionals to establish clear accountability for enforcement of the policy. Know in advance who may be called upon to testify about the company’s document retention and destruction procedures in the case of litigation.
Talk with your technology professional about segregating business email and personal email by applying different retention standards. A company may even wish to set standards for automatic deletion of emails unless the author or recipient makes a conscious decision to store the message as a business record.
Control and Label All Project Communications
Label emails, faxes, and communications in the subject line with the project name so that they can be easily identified, sorted, stored, and later deleted. Teach employees how to manage their electronic data. As a routine matter, decide which business documents must be kept and which can be discarded.
Be prepared to suspend regular retention and destruction procedures when litigation is pending or imminent. Have a plan in place for quickly notifying all necessary staff when this action must be taken.
E-Discovery Is Manageable
As construction companies adopt cloud computing, BIM, Integrated Project Delivery, and other electronic means and methods, they should also proactively establish and update electronic records management plans. Courts require companies to adhere to their own policies; thus, systematic compliance with an up-to-date policy is critical to managing e-discovery costs.
1 The RAND Corporation is a nonprofit institution that helps improve policy and decision making through research and analysis.
Patrick E. Gaas, a director in the Construction/Surety Section of the Texas-based law firm of Coats, Rose, Yale, Ryman & Lee, P.C., represents owners, general contractors, subcontractors, and sureties in construction transactions, defaults, claims and domestic and international dispute resolution. Tiffany Harrod is an associate with the firm. For more information: http://www.coatsrose.com/.