Deloitte Poll Sees Litigation Data Panic

Financial Advisory Services unit finds 40 percent of executives believe information levels under federal rules are reaching the unmanageable.
Stephen TaubAugust 4, 2008

Corporate executives feel that the volume of litigation-related data in their organizations is beginning to reach unmanageable levels, according to a recent online poll conducted by Deloitte Financial Advisory Services LLP.

The survey showed that nearly 40 percent of respondents believed that the amount of data that is electronically stored for use in case of lawsuits has reached that unwieldy level. What’s more, 17.5 percent said their companies are not ready to handle complex discovery requests.

Deloitte Financial said the issue arose from the amendment 18 months ago of the Federal Rules of Civil Procedure, which required that companies have the ability to access quickly an inventory of various electronically stored information in the event of litigation.

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The FRCP are regulations that specify procedures for civil legal suits within the federal courts. The rules were established in 1938, and have been revised at least 10 times, most recently in 2006. The 2006 revisions were intended to make provisions for the handling of electronic records and accommodate electronic discovery.

“Discovery is a very serious issue to business today,” said Bruce Hartley, a director in the Analytic and Forensic Technology practice of Deloitte Financial. “There are real stakes and real penalties associated with poorly handled discovery. In the past few years we have seen cases where defendants have faced jail time and millions of dollars in sanctions or penalties.”

More than 520 executives from the banking and securities, financial services, and technology industries responded to the polling questions during a recent webcast.

Despite the seemingly growing crisis, Deloitte pointed out that nearly 12 percent of companies surveyed had no policy in place to share clear guidance with the IT department and all other employees on document retention and destruction. Another 9.4 percent have no policy in place, but do distribute specific directives when litigation arises.

“Courts appear to be appreciative of organizations and their counsel when the companies have implemented a standardized practice and written policies, practices and procedures that are utilized to govern discovery procedures,” said Diane Barrasso, a principal in the Document Review Services practice of Deloitte Financial. “By implementing a policy of transparency internally, companies can effectively react to discovery requests, communicate with opposing counsel and significantly decrease errors when litigation arises.”

According to the Deloitte survey, executive respondents’ greatest concerns about document discovery included the expense of going through large volumes of files because of vendor or in-house costs (47.5 percent); damaged production and exposure to sanctions from vendor or in-house error (16.3 percent); and failure to meet deadlines set by the court (12.9 percent).

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