Litigation
| Don't cry over "spoliated" milk |
| Published Wednesday, May 13, 2009 8:30 am |
by MIchael S. Kridel, CPA/CFF/CITP, CFC
What is spoliation?
Fundamentally, and clearly defined by now infamous litigation and legal dictionaries, spoliation is "the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation." While there is no reference to form, electronic evidence is an unavoidable juggernaut bearing down on the legal system. It is available from so many sources, in so many forms, residing on so many devices and stored in so many locations that the old expression of "herding cats" truly applies to marshaling electronic evidence. Moreover, failure to comply with the increasingly complex and burdensome document retention and preservation principles can produce prodigious, and highly publicized, sanctions (think massive negative financial consequences) for the non-compliant party.
So, what is ESI?
Simply, it is data, documents and information that, though there may be hard copies, exists in systems to which each party to has access and, therefore, responsibility to maintain in as a pristine form as humanly (and technically) possible. This responsibility for maintaining ESI is not markedly different than for tangible evidence; rather, it is more complex because it is typically larger (but taking less physical space), stored in more forms, on more devices, more geographically dispersed, more economical to retain and subject to access by more users than other categories of evidence. Add to that, as those of us in the forensic world know, ESI is so much harder to destroy completely. You have all the makings, despite well-intentioned intended investment in and development of systems, for "no good deed going unpunished."
Where's the evidence?
Old paradigms of document storage and retention have become brittle and fragile in fact and application. While the definition of evidence has been expanded, it is still subject to the same theories of discovery and production. The typically-expressed rule of thumb used by so many laypeople - seven years - is rapidly being replaced by technological concepts such as local and remote storage, access authentication, redundancy and data persistency. Nowhere is the concept of a paperless society more obvious, and hazardous, than the legal system. Hundreds of thousands of documents can be stored on CDs or DVDs, forcing the legal system, professionals and business to reinvent processes, make substantial investments in new technology and retrain so many different people in so many different ways.
The Rule 26(a) of the Federal Rules of Civil Procedure changed dramatically in late 2006 with respect to ESI. There are specifically-defined processes, definitions, meetings and calendars that are designed to assist the parties try their case and, hopefully, mitigate the costs of production and litigation of ESI. Issues of access, data formatting, software/applications, costs, location are all addressed with the clearly expressed intention of expediting due process.
The Enron method of handling evidence is history
One of the most critical elements of evidence safeguarding lies in the concept of declaration by a party of a "litigation hold." This can mean different things to different people; however, in broad terms, it means that the Enron method of handling evidence is history, and all evidence, regardless of what it may be, is "frozen" and preserved as it exists at the earlier date of when litigation is filed or management should have foreseen or known that litigation was possible/likely. Every person who may be connected to the matter, or in a position to access or modify ESI, is notified and routine data retention and destruction procedures suspended. Failure to execute this can impair a party's ability to prevail in litigation and, as mentioned, subject that party to costly sanctions.
The future of discovery and production is here. Failure to understand these requirements, and prepare for their adoption in Florida courts, can result in inadvertent spoliation. That, in turn, may produce the word you thought I meant in this article's title – spoiled results with serious consequences.
Michael S. Kridel, CPA/CFF/CITP, CFC is a Partner with Daszkal Bolton LLP. He has primary responsibility for the Firm's litigation services and consulting practice, as well as its internal human resource and information technology systems. Michael has practiced public accounting in South Florida since graduation from George Washington University in 1974. Contact him at 561.367.1040 or via email at mkridel@daszkalbolton.com.
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