Defend Yourself Against New Legal Challenges: E-Discovery After New Federal Rules SEC Allowing/Proposing To Mandate Internet Delivery Of Proxy Material

Thursday, March 1, 2007 - 00:00

Judge Dana Senit Henry

E-Discovery: On December 1, 2006, amended rules governing the discovery of "Electronically Stored Information" (ESI) went into effect. A newly minted phrase, Electronically Stored Information refers to any type of data (including e-mail) that can be stored electronically. The ruling makes it clear that electronically stored information (ESI) is discoverable and may be used as evidence - for or against you - in litigation.

Thanks to some inaccurate news coverage, many employers mistakenly believe that the amended rules require all businesses to retain, archive, and prepare to produce all employee e-mail. However, having a "store everything" policy is impractical as important electronic documents are not segregated from casual e-mail and such a policy is counterproductive in trying to sensitize employees to the need of protecting the company when conducting business electronically.

Problem: Not all e-mail is inconsequential and expendable. E-mail correspondence that commits either sender or recipient to action, agreement, binding contract, etc. or serves a required notification function is in effect an electronic document that should convey the same strengths displayed by a hard-copy document after-the-fact. However, the inherent shortcomings of simple e-mail thwart verifiable proof after-the-fact: simple text can be altered by anyone and sender/recipient alike are unable to prove that the e-mail message actually was sent and received or contained what is purported to have been said, at a given time. [Being in a "sent" folder is meaningless as the document can be dragged there without having been sent; simple e-mail text can be altered; and a computer can be set to read any time desirable by operators.]

Solution: RPost Registered E-mail service is the only simple, cost-effective way to provide e-mailers the same verifiable protections associated with hard-copy documents. The RPost Registered E-mail core service provides the sender with verifiable proof of: sending and receiving; content (including attachments); and the atomic clock time stamps. The Registered Receipt e-mail (that is returned to the sender) is the strength of the service in that it provides a digital recording/snapshot of the server-to-server conversation that witnessed the e-mail transaction and the same receipt is then used to regenerate the original e-mail and attachments should anyone challenge the original transaction after-the-fact. Therefore, the inherent records management aspect of the RPost Registered Receipt allows a company to archive important e-mail transactions without having an elaborate document retention system in place.

SEC "E-Proxy Rules": The Commission has adopted amendments to the proxy rules under the Securities Exchange Act of 1934 to allow for the delivery of proxy materials to shareholders by means of the Internet. Effective March 1, 2007 but not to be used until July 1, 2007 the "E-Proxy Rules" allow issuers and others to deliver proxy materials to shareholders, except those relating to business combinations, by means of the Internet. In an attempt to reduce proxy costs and increase efficiency these voluntary rules allow issuers and others to satisfy delivery obligations by allowing for the posting of proxy materials on a publicly accessible website and requiring that a Notice of Internet Availability of Proxy Materials be sent to shareholders advising them of the availability of such materials and how to access them - "notice and access" model. The Commission has also proposed mandatory Internet delivery of proxy material by 2009.

Problem: The SEC's "E-Proxy Rules" contain specific delivery and content requirements and timeframes and deadlines relating to proxy cards, intermediaries and soliciting persons other than an issuer, etc. It will be only a matter of time before we see legal challenges based upon technical non-compliance issues relating to time and content with respect to electronic notices of availability of proxy materials. Producing copies of simple, plain text e-mail notices will not offer sufficient defense against such challenges.

Solution: Safeguard electronic proxy notices to shareholders by using RPost Registered E-mail services to provide verifiable evidence of precisely what was sent and received, by whom and when. The RPost service closes the delivery gap in electronic communications that may result when unprotected e-mail messages are disputed after-the-fact with respect to content, delivery status and/or official time stamp. Attorneys should protect against technical challenges to "E-Proxy Rules" by using RPost Registered E-mail services to insure integrity, reliability and authenticity of electronically transmitted documents.

After working as a judicial officer for many years, Judge Dana Senit Henry now serves as a mediator, arbitrator and private judge. She has been an advisor and commissioner to city, county and state agencies. She also serves in an advisory role with RPost Registered E-mail.

Please email the author at resolver1@earthlink.net with questions about this article.