The amount of electronic information that our technology can now produce is “virtually unlimited,” Tom Hilton with the Anders Minkler & Diehl accounting firm in St. Louis, Missouri, told attendees at a recent industry meeting in Vail, Colorado. Since the amendments to the Federal Rules of Civil Procedure to govern the production and preservation of electronically stored evidence (ESI) (see BVWire™ # 64-1), both the legal and valuation professions are “morphing” to handle the explosion of ESI, Hilton said. In particular, the “98% Rule” now indicates that in any legal matter, “you can assume that 98% of the information you’re going to see is electronic.” Discovery today means electronic discovery, and trial litigators have become, largely “discovery litigators and negotiators,” Hilton told attendees.
Already a new trend of “national e-discovery counsel” is appearing on the legal landscape. “National law firms and corporations hire counsel who are adept at ESI discovery and who have worked with IT professionals in complying with the federal rules,” Hilton explained. One such professional may supervise the e-discovery process, and then an entirely different person may take over when the case goes to deposition and/or trial. An entire “cottage industry” of IT professionals is “burgeoning” to assist forensic accounting experts in the production and preservation of ESI in litigation disputes, he told attendees.
The authors of the recent article, “Information Inflation: Can the Legal System Adapt?” (13 Richmond Journal of Law & Technology, Spring 2007), make a very good case that the legal profession and its related community of forensic and litigation experts are not prepared for the “out of control volume of information that is generated today,” Hilton said. In the legal profession, time and cost are the major impact-factors. For the financial expert, the fundamental hurdles are the reliability and authenticity of the information that forms the basis of their opinions, and “for us, authenticity is our credibility,” Hilton said. He cited the recent “seminal” case, Lorraine v. Markel American Insurance Co. (2007), in which the U.S. District Court warned:
If it is critical to the success of your case to admit into evidence computer stored records, it would be prudent to plan to authenticate the recorded by the most rigorous standard that may be applied.
Another must read for attorneys and litigations experts: Last March, the Sedona Conference published its Commentary on ESI Evidence and Admissibility, which illustrates the authentication process for various types of ESI under the federal rules (emails, chat room discussions, etc.), and also provides checklists, decision trees, and practice tips. “Litigation is now all about information and how we can demonstrate that the information is what it purports to be,” Hilton said. For a complete discussion of how the information explosion is impacting the legal and BV professions, the consequence of the Lorraine case “raising the bar” and the emerging responses from the American Bar Association and other professional resources, look for our coverage of Hilton’s presentation in the February 2009 issue of Business Valuation Update™.