By Charles F. Castner and Josephine H. Hicks
Contributing Writers

Litigation may have been the last thing on your mind as you hit the delete key on that recent e-mail, but you might want to give it more thought next time. Your company’s assets, including its reputation, might be at stake.

Eleven senior executives at Philip Morris wish they had: The company was slapped with a $2.75 million fine, or $250,000 per executive, because they deleted e-mail related to the massive tobacco industry lawsuit in violation of a court order (and company policy) requiring them to save the documents.

Discovery, the process of gathering information that may be relevant to a pending lawsuit, has always been an important and often expensive part of litigation.

But the proliferation of electronic information and its increasing value as evidence has created a new and potentially costly set of challenges in preserving and producing digital records that may become the target of e-discovery.

If the Philip Morris scenario doesn’t sound like something that could happen in your company, consider that even unintentional or accidental destruction of electronic information, or simply failing to provide it in a timely manner, can harm your case in a legal proceeding.

In a recent case involving Morgan Stanley, the judge instructed the jury to infer that documents the company did not produce were damaging to the defendant, and Morgan Stanley wound up paying a jury award of $1.5 billion.

Businesses of all kinds need to take a hard look at their electronic document retention policies and procedures to determine how readily they could satisfy an e-discovery request.

The extent of the e-discovery challenge is growing by the day, thanks to the rapidly expanding use of Blackberries, Treos, text-messaging cell phones and other tools for creating, sending and re-sending information that could become relevant in a legal or regulatory proceeding.

This gadget explosion adds to existing sources of electronically maintained information that can be targeted in e-discovery, including network servers, desktop hard drives, laptop hard drives, floppy disks, CDs and DVDs, backup tapes, voice mail and pagers.

And in addition to the electronic documents themselves, there is data behind the data that can also provide legal foes with key information.

Yet another challenge of e-discovery relates to the accessibility of electronic information, which can vary greatly depending on how much time has elapsed since the document was created.

Lawyers and litigants are scrambling to understand the obligations and limits of e-discovery as judges and court administrators issue new federal rules and decisions that specifically address questions related to electronic discovery.

Courts in the Carolinas and elsewhere have long made clear that the obligation to preserve evidence arises when a party knows or should know that the evidence is relevant to pending or anticipated litigation. In the electronic world, efforts to preserve evidence must be taken into account.

Most companies have document retention policies, and most IT systems are set up to automatically delete e-mails and other records after a certain time.

Destroying records under the routine company policy is fine until you know or should know that an investigation or litigation is likely.

Courts have ruled that a “litigation hold” must be placed on document destruction once you can reasonably anticipate a legal dispute or regulatory proceeding.

For a business, that means making sure employees with relevant information understand the duty to preserve electronically maintained information, including any information generated or maintained on home computers or Blackberries or PDAs, as well as hard-copy documents.

Document retention policies should provide that absolutely nothing related to any regulatory investigation, anticipated lawsuit or pending lawsuit may be destroyed. These policies must address retention of electronically maintained information as well as paper documents.

The first step is to map out the company’s business structure and information structure, identifying what systems and locations have physical possession of information for each business unit or function.

Many practical e-discovery issues arising from the nature of electronic information are still being worked out.

There’s a question of whether litigants are obligated to undertake expensive measures to retrieve inaccessible data from backup tapes or use skilled forensics to retrieve deleted or damaged data.

The emerging rule appears to favor only requiring parties to produce accessible data absent a showing of particular relevance and need.

In the final analysis, most electronic discovery issues can be addressed with well-known discovery principles and common sense.

To address these issues effectively, however, clients and attorneys must have a good understanding of the client’s electronic information systems, potentially relevant electronic information and accessibility issues.

Charles F. Castner is special counsel in the employment practice group at Parker Poe Adams & Bernstein LLP in Charleston, where he also serves as a member of the firm’s e-discovery committee. E-mail him at charliecastner@parkerpoe.com.

Josephine H. Hicks is a litigation partner in Parker Poe’s Charlotte office, and also a member of the firm’s e-discovery committee. E-mail her at josephinehicks@parkerpoe.com.

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