Electronic discovery – production of electronic data in litigation – is increasingly common, and often difficult and expensive. Amendments to the Federal Rules of Civil Procedure were intended to make electronic discovery more predictable but the effect has also been to place huge burdens on parties and their attorneys.

It’s easy to understand the need for e-discovery. I’ve seen one estimate that more than 80% of corporate information exists as data in computers instead of on paper – email, spreadsheets, word processing documents, Web content, scanned images, databases, instant messages, electronic forms, and the like. Assembling that data for discovery responses is expensive. Here’s three reasons why, from this article about the e-discovery process:

Electronic discovery is labor-intensive. Not surprisingly, the activities associated with the collection and reviewing of documents is largely a manual process. At each stage, documents still need to be read page by page, duplicates need to be weeded out, and in some cases, portions redacted for privilege.

Electronic discovery is often time-constrained. Most electronic discovery requests have timelines associated with them; the courts may apply sanctions if your response is not timely or unduly delays the progress of the trial. Consequently, many organizations need to resort to employing external resources to wade through the volumes of documents.

Electronic discovery can be technologically challenging. Metadata management. Locking down files for legal holds. Scrutinizing all potential sources of data/content (network drives, desktop computers, laptops, home computers), including alternate storage devices such as backup tapes, USB drives, iPods, etc. Accessing each of these sources presents its own technological difficulties, as well as significant labor and time expenditure. Imagine having to load and review hundreds, if not thousands, of backups.”

Two years ago, similar e-discovery rules were adopted in England. KPMG just released a survey of UK litigators showing widespread agreement that the rules are ambiguous; the judges and special masters are ill-equipped to make effective case management decisions; and the process is unbelievably expensive.

There have been a number of high-profile cases in the US involving e-discovery. Morgan Stanley and UBS paid huge fines for failure to adequately produce e-mail evidence; Morgan Stanley was later charged with a similar but unrelated failure to turn over millions of e-mail messages in regulatory proceedings with the NASD, as described in this article.

The Wall Street Journal just reported that 19 lawyers for Qualcomm are facing a sanction hearing this week after 300,000 pages of e-mails and documents were discovered after a trial with Broadcom Corp., including data that contradicted arguments by Qualcomm lawyers about key issues in the case. As the WSJ notes, “Failures in finding, saving and sharing emails are bedeviling large and small litigants, undermining their credibility with judges and affecting the outcome of high-stakes trials. New federal rules have reinforced companies’ obligations to produce electronic evidence, which has exploded in volume as emails replace phone calls and other business communications.”

The cost of production of data will be an increasingly important consideration in business litigation; e-discovery will virtually always require the retention of the specialized consulting companies that are springing up everywhere.

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