The Cost of Email Litigation
Sunday, July 13th, 2008
E-mail and other electronic communications have dramatically changed the contemporary legal landscape. By some estimates, more than 90 percent of the cost of a lawsuit today can come from sorting through e-mails and other electronic documents to determine which ones are relevant to the case.
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Ken Withers, director of judicial education at a legal think tank called The Sedona Conference, says that 20 years ago, a case that involved 300,000 pieces of paper was considered huge.
“That’s considered a drop in the bucket today,” Withers says. “The equivalent of 30 million or 300 million pieces of paper, if these were printed out, would not be unusual.”
The need to sort through those piles of documents has had a significant impact on the lives of recent law school graduates.
“Today a young person graduating from law school and joining a large firm in one of our major cities can look forward to perhaps three or four years of doing nothing but sitting in front of a computer screen reviewing e-mail and other electronic documents for litigation,” Withers says.
Although the quantity of documents is daunting, an electronic paper trail does carry an advantage. E-mails are much more searchable than paper documents. In fact, some companies now have proactive filters that can catch troublesome e-mails before anyone files a lawsuit.
For example, financial firms might look for the word “guarantee” — as in “guarantee a return,” says Cyndy Launchbaugh, who works for ARMA International, a nonprofit records management group.
Companies often can’t uphold such a statement, she says, so if the word, “guarantee” pops up in a company e-mail, the firm might check to make sure employees aren’t promising something they can’t deliver.
Sorting Through Documents
But many companies are not that organized. ARMA co-sponsored a study last year that found that one in four American companies does not have a system for organizing electronic documents. Such a system might tell companies what they should keep, what they can get rid of, and how to archive documents if they need to retrieve material in a lawsuit.
If a business without a system for organizing its electronic records gets sued, it can cost a fortune.
“It can get into the millions,” says Dave McDermott, records manager for J.R. Simplot, an agribusiness company.
Simplot does have a comprehensive records management policy, but the company only created that policy because roughly 40 years ago, federal investigators came asking for documents. At the time, McDermott says, “our records were stored in horse barns.”
McDermott suspects many companies only get on the electronic records management bandwagon after they’ve been sued once.
Today a massive company the size of Simplot may juggle 300 or 400 court cases at a time. Each case requires its own set of documents that has to be retrieved and sorted. The industry calls it “production.”
When a company that does not manage its e-mail gets sued, McDermott says, “many cases are settled, because the cost of production outweighs the cost of settling.”
In other words, when a company has to choose between spending millions of dollars on sorting e-mail and spending a few hundred thousand to settle a case, they may just pay the plaintiff to make the lawsuit go away.
After that, the company’s next step may well be to establish a comprehensive electronic document management policy. (more…)
