This article originally appeared in Alignment, a publication of the West Virginia Board of Architects.
Albert Einstein is credited with the shrewd observation that “everything should be made as simple as possible, but not simpler.” Architects would do well to make this their mantra, because in court simple stories win. With the proliferation of digital technology in construction and design, it has become ever more challenging and costly to spin mountains of data into a simple narrative a judge or jury can digest. Because simple and effective use of digital information is so crucial to winning construction disputes, you can no longer afford to poorly manage your electronic information any more than you can afford to poorly manage the construction process itself.
In recent years, digital technology has revolutionized the construction industry, bringing with it a host of new opportunities and challenges. Emerging design and construction techniques, collaborative approaches, and delivery systems that were un-thought of a decade ago are now the wave of the future. As digital technology has increasingly driven the design and implementation process, construction documents have moved from filing cabinets and drawing boards to tablets, hard drives, and cloud servers. Information that was once measured in banker’s boxes is now measured in gigabytes and terabytes. When disputes arise, the electronic documents and data generated during the construction project take center stage.
In a 2014 decision, a federal circuit court judge in Kentucky observed that “[l]ike the proverbial horseshoe nail, a single document could cost a party victory in a lawsuit.” In re Black Diamond Min. Co., LLC, 514 B.R. 230, 235 (E.D. Ky. 2014), District Judge Thapar’s analogy refers to a 1758 proverb found in Benjamin Franklin’s Poor Richard's Almanac illustrating the dire consequences of minor oversights:
For want of a nail the shoe was lost,
for want of a shoe the horse was lost;
and for want of a horse the rider was lost;being overtaken and slain by the enemy,
all for want of care about a horse-shoe nail.
Poor Richard’s Almanac (1758).
Like Franklin’s horseshoe nail, success in construction litigation often turns on finding a small number of documents needed to secure your position. Failure to do so properly can quickly result in being “overtaken.”
Even simple construction projects can generate massive amounts of electronic documents and data very quickly. Design documents, product specifications, change orders, BIM data, notes, minutes, reports, schedules, safety documentation, bid documentation, mobile app data, and many other categories of information combine to create a veritable mountain of information that can quickly become difficult if not impossible to manage without the right tools. Add to this the volume of emails that routinely accompany even the most straightforward communications on a construction project and the mountain grows larger still.
Sifting through electronic information relevant to a construction dispute can be exceedingly time consuming and expensive. A 2012 Rand Institute study evaluated the cost of electronic document review and production in various types of litigation. In the 45 diverse cases analyzed, the study found that the cost of electronic document production ranged widely from $17,000 to $27 million, with an average cost of $1.8 million. In one case, it cost $900,000 to produce enough data to fill less than one quarter of a single DVD. See The Rand Institute for Civil Justice, “Where the Money Goes: Understanding Litigant Expenditures for Producing Electronic Discovery,” at 19-20 (2012).
Without careful management, electronic discovery can be so expensive that its costs often eclipse the value of the underlying dispute. This phenomenon will become even more intense as the industry’s dependence on electronic design, management, and communication tools increases. Now more than ever, cost effective dispute resolution requires foresight and careful data management.
Electronic Data Retention
One of the best ways to simplify use of electronic information is to institute a systematic data retention policy before disputes arise. A data retention policy allows the possible field of electronic data to be narrowed on an ongoing basis so that relevant documents can be identified more efficiently when needed. Properly crafted and implemented, a data retention policy can result in enormous cost savings and efficiency.
There is no one-size-fits-all data retention policy in the construction industry. A document retention policy must be carefully crafted to reflect record retention requirements imposed by various state and federal laws. See e.g., 48 C.F.R. 4.700, et seq. (specifying various record retention periods applicable to federal contracts). When a contractor’s records are audited by a governmental agency or requested in litigation, a proper data retention policy will limit the volume of information that has to be examined while also justifying the absence of information that may have been discarded pursuant to the policy.
Duty to Preserve Electronically Stored Information
A party can be quickly “overtaken” by losing or failing to preserve documents and information as required by law, and the consequences can be severe. It is a universal rule that “a party who reasonably anticipates litigation has an affirmative duty to preserve relevant evidence.” Hannah v. Heeter, 213 W. Va. 704, 710–11, 584 S.E.2d 560, 566–67 (2003). Importantly, the duty to preserve evidence does not arise only after a law suit is filed, but even before litigation when a party is on notice that a lawsuit might be filed. Since the duty to preserve evidence depends on individual notice, the duty may arise at different times for different individuals even within the same organization. Where documents or data are destroyed after the anticipation of litigation arises, the responsible party is guilty of “spoliation of evidence.” The consequences of spoliation depend largely on the party’s state of mind when the spoliation occurs.
In order to be punished for destroying relevant evidence, the responsible party must have done so with a “culpable state of mind.” This does not require that the party intentionally destroy evidence it knows will harm it, but also includes mere careless or negligent failure to preserve evidence.
The possible penalties for spoliation of evidence depend largely on the responsible party’s degree of fault. Sanctions can range from allowing the jury to assume the missing evidence would have been unfavorable to the spoliating party, to more severe sanctions like precluding defenses, or dismissing claims in their entirety. The more draconian sanctions are generally reserved for parties who willfully destroy important evidence, but any spoliation sanction can prove very costly.
Document Review and Production without Breaking the Bank
Regardless of which side of a construction dispute you are on, quickly identifying and preserving the relevant documents and data is pivotal to your success. Doing so in a cost-effective manner is central to a satisfactory result. Reaching this result depends on leveraging the right technology and expertise to do the job.
Attempting to perform electronic document production without sophisticated technology and expertise is like attempting to design a modern office tower with only an abacus. Maybe it can be done, but it’s going to cost you dearly in more ways than one. While there are many who are still applying conventional methods to electronic data, in our experience a dedicated electronic discovery team armed with sophisticated tools is able to analyze documents and data much more effectively with significant cost savings. As technology becomes more and more complex, experienced electronic discovery professionals who know where to look, what to look for, and how to access what they find will become ever more crucial.
While the digital revolution has created previously unimaginable opportunities in construction and design, it has also created numerous pitfalls for the unwary. Without the necessary foresight and expertise, a party can become overcome by the massive volume of data created during the course of constructive activities. Knowing what to keep, how long to keep it, and what to discard will become increasingly imperative as the industry’s dependence on digital technology increases.
When disputes arise, the ability to efficiently find the documents that tell a simple story will become even more critical, and will depend largely on the expertise of those performing that task. Without this expertise, the cost of potential disputes could eclipse not only the value of the disputes themselves, but the value of doing business altogether.