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ESI Discovery Issues in Business Litigation

Electronically stored information (ESI) has revolutionized the business world. Unfortunately, the law has not entirely caught up. One vexing problem involving ESI occurs in litigation involving breaches of fiduciary duty and business oppression. Minority owners in corporations, LLCs and partnerships have limited statutory rights to view records, and as litigants, have the right of discovery. But “examining the books” in an age when “books” no longer exist can present numerous problems. The most recent amendments to Rule 34 of the Federal Rules of Civil Procedure and Illinois Supreme Court Rule 201. try to tackle these problems, but concerns still exist.

Some of the major problems are:
• Definition — Because so many ways exist to create, transfer and store ESI, the rules are intentionally broad. Overly broad definitions can result in discovery objections arguing that requests are unreasonable. Motions to compel and resist discovery can significantly increase the cost of litigation.
• Scattering — Exactly where are the records? Do they reside on a central server in the office, an individual employee’s hard drive, or elsewhere? Did company officers restrict their communication to company email accounts? Or are private email accounts subject to discovery? Keeping the records “in the cloud” can create a whole new set of problems.
• Overproduction — Email alone exponentially increases the volume of written business records. The venerable “snowstorm” strategy – burying material data under an avalanche of inconsequential information becomes easier than ever. Sifting through mountains of data can add to litigation costs, requiring litigators and forensic examiners to combat by using computer-aided search technologies.
• Metadata — ESI often contains information about who made what changes to a document and when. Metadata does not appear on a printed document, but may be found on the electronic file.
• Privilege and privacy — The sheer volume of ESI makes it entirely too easy to release privileged information and personally identifiable information by mistake.
• Cost-shifting — While most litigation operates under the “American Rule” – that the producer of discovery documents bears the cost, the new Rules sometimes allow the producer to shift the cost to the requesting party when the information sought is not reasonably accessible. This could present a significant financial burden to plaintiffs in business oppression lawsuits.

Your litigation strategy must assess the costs and benefits of ESI production during discovery. At Schwartz & Kanyock, LLC, our litigation attorneys have more than 50 years of combined experience in complex corporate litigation. To learn how we can manage your discovery, call us at 312-436-1442 or contact our Chicago office online.

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