Eureka: E-Discovery is Upon Us
by Anthony Mongeluzo, PCS –
August 1, 2018
In 2005, a decision by the Federal Rules of Civil Procedure crossed the legal Rubicon when they amended a ruling that, in its simplest form, stipulated that parties in a legal dispute must share relevant electronic information. In the predigital age, discovery meant sharing information, or “hard copy” in today’s parlance, with all parties involved in litigation. Today, e-discovery has broadened the range of what constitutes discovery.
E-discovery (sometimes known as electronic discovery), is “the electronic aspect of identifying, collecting and producing electronically stored information (ESI) in response to a request for production in a lawsuit or investigation,” according to Complete Discovery Source, an e-discovery consulting firm. They remind us that ESI isn’t only about email but can apply to databases, PowerPoint presentations, audio, video, social media and websites. If you’ve “touched” it digitally, it can be a target for e-discovery.
And remember that in a lawsuit, e-discovery isn’t something easily dismissible. Along with any paper trail, today your digital fingerprint on all relevant documentation is discoverable.
Inevitably, this leads accountants into the legal area, where they will need an attorney. Most business people detest the idea of lawsuits, and, in the digital age, e-discovery is that added level of complexity to protecting your accounting practice and potential information about clients. To protect yourself, consider:
- Nothing is casual in court. This could easily be the most important advice I can offer. Unlike a face-to-face meeting or even a phone conversation when facial expression or tone and verbal emphasis can convey sarcasm, reluctance or impatience, none of this is evident or obvious in an email or some other form of transmission. Matching whatever you’re typing and putting it down on “electronic” paper, when read in a monotone voice aloud in a courtroom, can hurt you. And I wouldn’t count on smiling emojis to lessen the impression that it conveys.
- How computer savvy is your attorney? A 2015 study by Exterro, the Federal Judges Survey on E-Discovery Best Practices and Trends, noted that, “not a single one of the 22 responding judges said they fully agree with the statement that the typical attorney possesses the subject matter knowledge (legal and technical) to effectively counsel clients on e-discovery matters.” Worrisome. If your attorney still uses Word 97 or seems befuddled by computer basics, I’d suggest talking to another attorney. He doesn’t have to be a computer expert, but he must be comfortable with the digital environment and have experts available even if they’re outside sources.
- The plan, boss. In the IT world, we virtually insist that clients have a disaster plan, which usually translates into a backup system that is complete, reliable and quickly accessible. There is a corollary to this in e-discovery. Philadelphia attorney Stanley Jaskiewicz suggests that accountants “adopt a retention and destruction plan before any litigation arises, so that you don’t have embarrassing, at best, or difficult, at worst, disclosure decisions.”
- Who pays for e-discovery? “Ideally, the client involved in the litigation should pay those expenses — called ‘costs’ — in the litigation, like any other pass-through bill,” according to Jaskiewicz. “In some cases, some of these expenses may be recoverable from the opposing party in the litigation.”
- Who is the expert? You’re the accounting pro, and the attorney is the legal expert. But who does the actual e-discovery. You can do it yourself, which entails searching, filtering the data and then providing them to your attorney, according to Michael Nelson, founder of Philadelphia-based DFDR Consulting. “Many people will likely copy and paste data which is forensically unsound and will likely result in the loss of metadata,” he says. Doing it yourself can challenge your objectivity because it’s tempting to leave something out if it’s unflattering. Some firms don’t spend enough on IT, which affects the efficiency and speed of the process if it’s done in-house. “If they are not organized, they may miss data or not know where everything exists,” Nelson says. “For accountants, their ultimate concern is getting to the numbers, and all the tech stuff and data might not be in their wheelhouse.”
- The last word. On e-discovery, we can turn to Jaskiewicz, who invokes the ounce of prevention advice. “The solution is not to hide bad records,” he says. “Instead, don’t create them in the first place.”
This article appeared in the July/August 2018 issue of New Jersey CPA magazine. Read the full issue.