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Douglas M. Bean, Esq.
Vice President & General Manager, Records, Compliance & Legal Solutions
Océ Business Services

Editor's note: Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today. If you'd like to participate in this section in the future, please email Scott Chase.

You’ve mentioned that organizations are grappling with a number of challenges in order to deal with electronic discovery. What are these issues and why should board directors be aware of them?

We recently issued a comprehensive survey report, “Dawn of the Discovery-Ready Enterprise,” which uncovered nine critical challenges that corporate and law firm attorneys are facing in order to deal with the growing tide of electronic discovery. Over 100 surveys were completed by legal professionals highly experienced in legal discovery and records management.

The critical challenges examined in the report span a range of issues that include inadequate records management programs, changes to the Federal Rules of Civil Procedure, escalating costs of electronic discovery, effective outsourcing strategies, and more.

In the last year a growing number of courts have doled out serious punishment to litigants who didn’t follow the new Federal Rules of Civil Procedure as they relate to electronically-stored information (ESI). Corrective action ranged from sanctions to directed verdicts. The public discovers these reprimands because they are reported in the media, which erodes public confidence in the organization at fault. Consequently, the damage goes far beyond the monetary.

When public confidence is eroded, shareholder value ultimately suffers. Stock prices may drop and further investigations by the government or additional lawsuits typically follow. These difficulties directly affect the officers and directors of the company and could be avoided if the organization takes the necessary steps to prepare its electronic systems for discovery. The key here is “readiness.” A company must prepare; it must look forward and invest in the necessary systems, personnel, and processes to protect against this kind of assault.

Did any one issue in the survey report stand out?

One of the nine critical challenges disclosed in the survey -- inadequate records management – represents a major issue. Among surveyed attorneys at companies that have a fully-implemented records program, only 8 percent say their program addresses ESI very well. Among attorneys at companies that lack a fully-implemented program, 26 percent say that their company has no plans to implement a program and 17 percent don’t know whether or not their company has any plans.

Lack of a records program or an inadequate program can cause a company to falter in the face of litigation involving large document reviews. Specifically, when litigants are unable to search, review and provide responses to requests for electronic data or otherwise miss discovery deadlines, courts will not hesitate to issue adverse rulings and jury instructions which can create serious disadvantages and may ultimately prove to be outcome determinative.

You mentioned that changes to the Federal Rules of Civil Procedure also present a major challenge. How so?

Another major challenge revealed in the survey centers on confusion about the Federal Rules of Civil Procedure. Only 10 percent of corporate counsels say they understand changes to the FRCP very well. 33 percent frankly state that they do not understand the changes very well.

In December 2006, the FRCP were amended to recognize the importance of electronic data in litigation in federal court. If corporate leaders fail to keep strong tabs on the extent and type of electronic data in their businesses, they run the risk of facing serious penalties should a lawsuit arise where the opposing party seeks access to that data.

Several court decisions, including many issued before the implementation of the FRCP amendments, serve to illustrate that this relatively recent legal trend involving the management of ESI should be carefully reviewed by corporate counsel. Indeed, in the litigation context, the penalties for failing to adhere to the practices mandated by the FRCP can be substantial and may also be used to negatively influence a jury.

How can organizations become better prepared to deal with the many challenges connected with legal discovery?

One way is to focus on being proactively prepared for electronic discovery by instituting a litigation readiness plan. With a plan in place, organizations can become discovery-ready by shifting from a largely reactive response to taking action to achieve superior improvements in discovery preparedness. To accomplish this, enterprises are implementing new methodologies such as a forward-thinking solution we term a Unified eDiscovery Platform. This unified approach recognizes the interconnectivity of records, paper and electronic discovery, and compliance processes.

Both corporate counsels and law firm attorneys agree on four key business benefits of being proactively prepared for electronic discovery. These benefits include: reducing the risks associated with discovery; shortening the time necessary to produce documents; reducing the costs of discovery; and minimizing potential business disruption.

Are business leaders getting the message about being prepared?

Some companies are acting now to better manage electronic documents and be ready for electronic discovery. Any enterprise not taking such timely, effective action to reduce exposure and gain better control of its ESI will fall behind evolving best practices. A unified, proactive approach to discovery and records management no longer appears to be an option, but a critical element of unimpeachable corporate governance.

* The full report, “Dawn of the Discovery-Ready Enterprise” can be obtained by visiting www.obs-innovation.com or contacting Christi Scow at 801-951-5443 or christis@casedata.com.

Douglas M. Bean, Esq., is Vice President and General Manager of Océ Business Services’ Records, Compliance and Legal Solutions Division. Océ Business Services, Inc. is one of the world’s leading providers of document process management services and technology to law firms, corporations and the public sector. The Records, Compliance and Legal Solutions division provides electronic discovery, paper discovery, forensics, and Web-based review services. Mr. Bean can be reached at dougb@casedata.com.