Lax e-mail guidelines can open a legal can of worms

Harold Turner learned the hard way that it pays to be careful about a company’s electronic data.

Turner, president of The H.L. Turner Group Inc., a Concord engineering and architectural firm, said his company got involved in a bruising intellectual property lawsuit case last year against a competitor who publicly promoted special building designs strikingly similar to Turner’s shortly after hiring a key Turner employee.

The case was “settled to our satisfaction after it was ascertained as part of the discovery process that files coming to our office were transferred to the employee and brought into the competing firm,” Turner said.

Although a Merrimack County Superior Court judge had ordered the former employee to preserve all electronic data connected to the case, it became apparent during discovery that “some documents were taken by the employee and destroyed,” Turner said.

Turner is referring to a problem more and more New Hampshire businesses are grappling with. Like paper, e-mail is subject to the judicial discovery process in court cases. E-mail may seem private, but its chit-chat-like quality has made it a hot target in court cases, lawyers say.

Discovery is the part of the litigation process in which you obtain information from the opposing side, says Ellen L. Arnold, associate general counsel for Dartmouth College. “It’s based on the premise that the trier of fact is trying to arrive at the truth, so you have an obligation to give the other side information about the case.”

Instead of letters, “e-mail has virtually replaced written correspondence. It’s more like using the phone, but the reality is you’re creating a written trail — like a paper trail, but it’s not because many people don’t print out their e-mail, it’s in cyberspace somewhere.”

E-discovery is as big an issue in New Hampshire as anywhere else in the country, lawyers say.

“It’s happening everywhere,” says Cameron G. Shilling, a trial lawyer specializing in intellectual property litigation at the McLane Law Firm in Manchester. “New Hampshire, Alaska, Florida — everywhere this is becoming an issue, because almost all companies, sophisticated or not, have electronic systems.”

Whether a case involves alleged discrimination, anti-trust, securities or a contract dispute, e-mail is now an issue.

“This is absolutely a hot topic right now,” said Shilling. “It is the biggest thing businesses need to be aware of in business litigation. It can be the single biggest problem for a company, and it often has virtually nothing to do with the merits of the case.”

With one Zip disk able to store “the collected works of Shakespeare 500 times,” an employee could store enough data on one disk “to essentially carry off a company’s entire trade secrets in your breast pocket,” says Shilling. And what makes the issue so “dire,” Shilling says, is that few companies are ready for e-mail issues in litigation. “The vast majority of companies are unprepared.”

Destroying data, even inadvertently, can prejudice judges and juries against a company and cost them stiff fines, lawyers say.

“Right now, the sanctions are so severe, whether you have electronic data that is damaging or not, if you didn’t save it, you can have problems,” says Shilling, chair of the American Bar Association’s Subcommittee on Non-Competitive Agreements and a frequent presenter on e-discovery.

Mistakes can cost companies “huge monetary sanctions” and even cost them a case, Shilling says. “A judge will instruct a jury that they may assume that that data destroyed may contain evidence that is damaging to a company, and companies are paying huge amounts of money to recover data.”

“Any trial lawyer worth his salt will say ‘get me your e-mail, and if it’s been deleted, we’ll undelete it,’” says Bruce Felmly, another lawyer at the McLane firm and a fellow at the American Association of Trial Lawyers. “And if it’s read and reviewed, you’re going to find sometimes helpful, sometimes harmful e-mails involving the case. The key is people tend to assume their e-mail is truly confidential, and it actually isn’t.”

‘Gift that keeps on giving’

Judy Gosselin is president of JAG & Company Investigations, a Manchester-based private investigator specializing in computer forensics and data searches.

Gosselin has been brought in on cases involving intellectual property theft, theft of trade secrets, falsifying bankruptcy filings, insurance schemes, divorces and employment cases involving harassment, deleted files based on pending audits, mergers and acquisitions. “All it is following the data flow,” she said. “It’s like the gift that keeps on giving, because most companies’ information is in e-mail”.

Most people will tell their computer anything they won’t tell their friends or their spouse – “thinking nobody will find them,” says Gosselin. “Then they delete their files, but much of the time I find them. On one guy’s computer, I got 139 pages of international porn sites he was hitting during work. In one racketeering case a year and a half ago, I got called in to do computer forensics to see if employees were scamming. I found porn, e-mails, documents on a new company being set up by employees, stealing their customer base. It just went on and on.”

While she he says she doesn’t “want to scare people,” she adds that companies “need to have policies and procedures around data and security of their information, and make sure it’s consistent across all their facilities. And if there’s pending litigation or it’s reasonably anticipated, it’s their duty to absolutely preserve documentation.”

Arnold ran into the issue during a legal dispute over a Dartmouth construction project. The case was eventually settled in the college’s favor after she had the project’s history reconstructed via e-mail during discovery, Arnold said.

“We do virtually all our communications by e-mail, but Dartmouth is very decentralized. It was a huge undertaking just to be able to make sure we’d gathered all the information,” says Arnold. “People had to go through hundreds of e-mails to find anything related to this project. But e-mail established the facts of the case.”

Arnold now encourages employees “to be more careful about what they put in e-mail because it is all discoverable, and to keep it better organized so we can find it more easily. If we see a potential problem, we try to centralize the information so it will be retrievable.”

In the Turner case, the discovery process ascertained that important company documents had been moved electronically outside his firm, even though “we had certain levels of protections in place, or so we thought,” says Turner.

The settlement included the return of all of Turner’s documents, and the competitor paid for the intellectual property litigation, he says. Both the competitor and former employee also agreed not to use Turner’s proprietary information, he says.

But the case left Turner saying, “Any time you have to do that, it takes away from your time and productivity. There’s no upside to it.”

Turner has since beefed up internal e-security. And he warns other companies to protect their electronic data. “A lot of valuable assets are in electronic form,” Turner says. “And it’s a lot easier to hit ‘Send’ on a computer than to walk out with a box of 8-by-11 paper.”

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