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Survey: Companies not prepared for new e-discovery rules

The blame falls primarily at the feet of general counsel

By Sharon Fisher
November 21, 2006 12:00 PM ET

Computerworld - Few corporations are prepared for the new federal rules slated to take effect Dec. 1 for electronic discovery of documents in civil cases, according to a survey conducted by Computerworld.

About 42% of the 170 IT managers and staffers surveyed said they did not know the status of their company's preparation for the new rules, while 32% said their company was not at all prepared.

The new rules specify requirements for submitting electronic documents – including e-mail and perhaps even IM logs -- as evidence in civil cases.

The rules were recommended in September 2005 by the Judicial Conference of the U.S. Supreme Court's Committee on Rules of Practice and Procedure. Some states have instituted similar rules (see "New e-discovery rules go into effect in December ").

If the survey is correct, a widespread lack of preparation that could lead to large fines to companies, said John Bace, an analyst at Gartner Inc. in Stamford, Conn., who said the Computerworld survey results are in line with his research.

The new rules, described in a 300-plus-page document, require that companies that are involved in civil litigation meet within 30 days of the filing to decide how to handle electronic data. The firms must agree on what records are shared, which electronic format is used and a definition of "accessible data."

Courts have indicated in past actions that penalties for failure to comply could be harsh – and costly. Even before the rules were recommended, Morgan Stanley was fined $1.5 billion -- half of which was punitive -- in May 2005 when a judge ruled that it had failed to preserve information.

Of the Computerworld survey respondents, 15% said their company was halfway or somewhat prepared, while 5% said their company was completely prepared. Twenty-two percent said they had prepared for the new rules by reading about them, and a few said they had retained inside or outside counsel. Several respondents also said this was the first time they had heard of the new rules.

Don Green, manager of accounting and information systems at Texas Aromatics LP, a petrochemical company in Houston, said he had not even been aware of the rules changes before receiving the Computerworld survey, but he said he was going to speak to his outside legal firm to determine what the firm needed to do.

James Brady, e-mail administrator in enterprise information services for the Cedars-Sinai Health System, in Los Angeles, said during a presentation at Storage Networking World earlier this month that the ediscovery rules were a "looming new problem" and that they would force many heath care organizations that have no official retention policy to initiate one. At Cedars-Sinai, Brady said he spent six months lobbying his management to begin preparing the new rules and he is now spending $6,000 per month copying tapes – some that go back to email on a Digital Equipment Corp. VAX minicomputer from the 1990s – because he is under a lot of pressure to save every backup tape due to concern about complying with the rules, he said.

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