PREPARING FOR THE ESI REVOLUTION IN BUSINESS LITIGATION As mentioned in a previous newsletter, the Federal Rules of Civil Procedure have changed concerning the discovery of Electronically Stored Information. ESI discovery issues are already appearing state court cases as well. While the Oklahoma Legislature has not addressed ESI to date, officials of the Oklahoma Bar Association are suggesting that they will recommend that Federal Rules and guidelines be followed in the interim. These new rules are going to prove costly for business owners involved in litigation. Every business owner needs to know some basic facts about this profound change in the business climate.
First, business owners should know what ESI is. It is any information stored electronically, not just computer information but also information stored on cell phones, PDA’s, fax machines, copying machines and printers, and even industrial equipment with memory storage capacity.
Second, business owners should know that they are charged with a duty to preserve ESI from the moment they are aware that a lawsuit may be possible. Logically, it would seem that the business owner would be responsible only after being served in the lawsuit but that is not the case. This section was added to prevent business owners from deleting ESI from their systems after they become aware of a potentially litigious situation.
Third, business owners should know that if a lawsuit is filed against them, it is highly likely that they are going to be required to produce a lot of information from their computers, cell phones, etc. This in turn, is going to require a considerable amount of legal and technical help that most small businesses do not possess in-house.
Fourth, business owners should know that whether they file a lawsuit or have to defend against one, they are going to have to allow their attorneys to process and review a considerable amount of ESI produced in discovery by the other side. This will probably require the attorney to retain technical experts to assist in evaluating the evidence.
Here are four tips that should help the small business owner prepare for ESI litigation:
First, the business owner should make an “ESI Map” of their company that lets them know where all of their electronically stored information is. This should include at minimum all computers, servers, phone systems, cell phones, PDA’s, fax machines and printers that have electronic storage capability. If your company uses off-site data services, that information is covered as well and should be a part of the “ESI Map.” If the company operates heavy equipment, trucks or industrial equipment with electronic storage capability the owner should confer with their attorney about a strategy for preserving and collecting that information as well.
Second, the business owner should develop a plan to preserve ESI without shutting their company down. For a small business, this can be as simple as buying a duplicate hard drive for each computer and server which can be used to make a mirror image of each operating hard drive when the situation requires it. The mirror image can then be used to operate the business while the “old” hard drives are locked down as evidence.
Third and fourth, the business owner should develop a relationship with a computer savvy attorney, introduce them to their internal IT manager if appropriate and then prepare a plan to both answer ESI discovery requests and process ESI discovery information from the other side.
The sanctions against a business that does not respond appropriately to an ESI discovery request can be financially devastating. In short, business owners must be prepared to handle ESI challenges to have any hope of surviving a lawsuit. AT THE PODIUM Bill Kumpe was recently a guest lecturer at Oklahoma Weslyan University on the subject of: "The Law Driven Crisis in Business and Personal Ethics." Bill Kumpe was recently a guest on the Heartland Radio Program on KFAQ 1170 AM, Tulsa along with Austin Nimocks of the Alliance Defense Fund. They discussed recent developments in the O'Darling lesbian divorce case as well as a controversial ruling by the Oklahoma Court of Criminal Appeals in which a convicted murderer's death sentence was overturned in part because the slain trooper's widow quoted scripture in her victim impact statement. | ARE YOU READY FOR NEW BUSINESS PAPERWORK? In today’s cafeteria style legal services market, an increasing number of clients want to provide minimal information about their business and walk out of an attorney’s office with a pre-packaged business entity just as they would from one of the out of state legal forms providers that sell “hundred dollar LLC’s.” That can be done, but the business owner has to be ready to step up to the plate and handle the paperwork that is inevitably going to follow.
A lot of small business owners run their business from their checkbook or in extreme cases from their wallet. They may pay  their quarterlies and file a yearly tax return, but that’s about it. This system probably works well enough so long as the company stays “under the radar” of state and federal agencies.
But, as small businesses grow, add employees and assets, or need to borrow to fund expansion, the structure of the company has to change, usually by incorporation or the formation of an LLC. When the company incorporates or registers their LLC with the state, they suddenly become visible to the myriad of state and federal agencies that regulate American business. When that happens, the business owner has to be ready to take on the increased administrative burden of reporting and accounting requirements that they should have been handling all along. Within a few days to a few weeks, the new business owner may receive a considerable number of requests for information from all sorts of state and federal agencies. Many small business owners are just not ready for that burden.
Most start-up small businesses cannot afford to have their attorney respond to every piece of paperwork and every request for information that they are going to receive. Given this, the small business owner must have a plan in place to respond.
No matter what business entity is chosen, paperwork is going to be required. A lot of it. If the business does retail sales of any sort, a sales tax permit is going to be required and the business is going to have to file periodic sales tax reports. The State of Oklahoma provides free seminars to handle this and the workers at the seminar will assist with necessary initial filings.
If the business is regulated by the state, no matter what entity is chosen, a considerable amount of paperwork will probably be required by the state agency that regulates it. An attorney’s assistance may be required with these filings, especially if the filings involve complicated legal and environmental issues.
The small business owner that forms a new business entity also needs to be prepared to keep books, real books, not just a list of account’s receivable and a checkbook register. Unless the business owner has an accounting background, the best way to handle this to either retain a competent business CPA or if the business is large enough, hire an internal bookkeeper.
In short, the small business owner that forms a new business entity should plan to take on an increased administrative burden and have a team selected to help them handle what is to come. TRUE LEGAL JOKES: The following statements were actually made in court: Q: What gear were you in at the moment of the impact?
A: Gucci sweats and Reeboks.
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Q: What was the first thing your husband said to you when he woke up that morning?
A: He said, "Where am I, Cathy?"
Q: And why did that upset you?
A: My name is Susan.
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Q: Do you know if your daughter has ever been involved in voodoo or the occult?
A: We both do.
Q: Voodoo?
A: We do.
Q: You do?
A: Yes, voodoo.
______________________________________ Q: ALL your responses MUST be oral, OK? What school did you go to?
A: Oral.
______________________________________ AT THE PODIUM CONT: Oct. 28, Bill Kumpe was a guest speaker at Tulsa's Heartland Church on the subject of Jurisdictional Issues in Church Entity Selection.
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