October 02, 2009

Computer technology has revolutionized the way businesses operate in today’s market. Companies that rely upon computer technology advances to support their business are often unaware of the impacts that technology can have on business disputes and the extent to which computer advances have altered the legal landscape. By better understanding the changing landscape, businesses can more effectively prepare to confront litigation, protect business interests, and minimize the effect of legal disputes on daily operations.

It is now routine for businesses to market and sell products over the Internet and to negotiate business deals by email. However, businesses should understand the legal implications of these activities on legal disputes. For instance, a local business selling products through a website may be surprised to learn that it has subjected itself to a potential lawsuit in a state where it has never physically done business. When a legal dispute ensues, the business may encounter the increased litigation expense and inconvenience of defending itself in a distant forum.

In addition, simple emails exchanged between partners, customers, and vendors can significantly impact a businesses’ legal rights. In the past, business owners often conducted contract negotiations in-person or by telephone. Today, business proprietors commonly negotiate business deals largely – or even exclusively – via email. The effect can be substantial. Email negotiations are often sufficient to establish an enforceable contract. Further, while parties generally do not maintain detailed records of their verbal negotiations, negotiations conducted by email generate a verbatim transcript of the parties’ interchange, which can later be used at trial.

Computer technology has also dramatically impacted the discovery process in business litigation. “Discovery” is the process by which parties to a legal dispute exchange documents and information relevant to the dispute. With the advent of email, document management systems, voicemail systems, and other technologies that allow businesses to transition to paperless operations, the amount of potentially discoverable information has increased exponentially. Moreover, the current trend in courts is to allow adverse parties to obtain extensive access to this electronic information. The result has been a more complex and intensive discovery process in which parties to a lawsuit may be required to expend substantial resources reviewing and producing electronic files.

This problem is often compounded by the fact that most businesses today backup their data, making it possible that many more potentially relevant documents are available than are shown on the network, including documents thought to have been deleted. To minimize these concerns, more and more businesses are involving information systems personnel in legal disputes, implementing software to narrow the categories of data to be considered, and developing more finely tuned document retention policies.

Many businesses are also unaware that electronic files contain information that is unavailable in a paper version of the same document. Metadata, for example, is “hidden” data that exists behind what is viewed on the screen. It can disclose information regarding the document’s author, its creation date, modifications made to it, etc. This information may place an organization at risk in a legal dispute. As a result, many companies now implement metadata assistants that strip metadata from documents or that remove data signatures. Also, more companies convert electronic files to PDF or other less revealing formats before distributing them.

Electronic case management is also impacting the handling of litigation in federal courts and in some state courts around the country. Various courts, including the U.S. District Court for the District of Utah, are now or will soon be posting court filings on Internet-based databases, allowing litigation pleadings to be accessed remotely. These systems increase the risk that confidential or sensitive information may be more readily disclosed or misused. This is particularly true where, as in the federal case management system, the database is searchable and anyone can access the system.

For business owners, the availability of information regarding a legal dispute may pose particular concern. For instance, a business involved in a legal dispute or a bankruptcy may want to prevent competitors or others from obtaining information about its customers, products, or assets. Some protections exist to prevent such information from being disclosed. However, these protections are not without limits. Businesses involved in legal disputes should consult with counsel to understand the information that may be used during a legal dispute and the ways in which it can be protected from disclosure.

Advances in technology have changed the way businesses compete in today’s market. But even tech-savvy businesses sometimes overlook the way technology has changed the legal disputes they may face. Understanding those changes and the impact they can have on a business will allow a company both to avoid some disputes and more effectively manage those that cannot be avoided.

(The above article first appeared in the April 2006 issue of Connect magazine and is reprinted with permission).

Cameron Sabin is a commercial litigation attorney with Stoel Rives LLP. He represents businesses and individual clients in a variety of commercial matters, including corporate and real property disputes and other general commercial disputes. He can reached at 801-578-6929 or at [email protected].

This column is not to be considered legal advice or a legal opinion on specific facts or circumstances. The contents are intended for informational purposes only. If you need legal advice or a legal opinion, please consult with your attorney.