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Discovering the Cloud – Issues to Consider Before Storing on the Cloud

By: Sean Perryman

Cloud computing can provide enormous benefits to some companies, but only if risks and expenses are evaluated in advance.

Businesses increasingly rely on cloud computing to store documents and information. Through third-party service providers, the cloud can reduce IT management and maintenance costs, presumably maximizing operational efficiency.

Companies considering moving data to the cloud typically believe these financial and operational benefits outweigh the risks. While the media has focused on security risks, litigation and discovery complications may prove even riskier factors to a third party storing and preserving your company?ÇÖs data.

Normal discovery rules may apply to the cloud

Sophisticated organizations recognize the duty to preserve relevant information in anticipation of litigation. They have in place litigation holds and other procedures to address this duty. As businesses transition to storing data in the cloud, they should implement similar document retention procedures.

Federal Rule of Civil Procedure 34 and comparable state-law discovery rules require a party to produce documents and electronically stored information within its ?Ç£possession, custody and control.?Ç¥ Judges often find data stored in electronic storage to be in the ?Ç£possession, custody, or control?Ç¥ of a litigant and subject to normal discovery. The cloud should receive the same treatment as yet another form of electronic storage. The actions of a third-party vendor will probably not excuse deletion of data that should have been preserved. Some state courts, in fact, hold parties accountable for both intentional and negligent spoliation. See, e.g., Trevino v. Ortega, 969 S.W.2d 950, 957 (Tex. 1998).

Questions to ask cloud solution vendors

To avoid potential discovery problems before they arise, ask your cloud solution vendor:

?Çó How long are records maintained?
?Çó What measures are taken to comply with litigation holds?
?Çó Is there a mechanism to halt any automatic data destruction processes in place?
?Çó Can searches of mailboxes, folders, or specific papers be conducted?
?Çó How is data extracted?
?Çó How much does it cost to extract data?
?Çó Are metadata preserved?

Check out PLI?ÇÖs Social Media 2012: Addressing Corporate Risks webinar for more analysis of these issues.

The answers to the above questions will provide an idea as to how much control you retain in the storage process, and whether the cloud solution vendor can properly maintain the data in a way that comports with any non-delegable duty on the company to preserve the documents for litigation. Additionally, this will provide a truer assessment of the costs of using cloud storage.

David Bell is a partner in the Dallas, TX office of the law firm of Haynes and Boone, LLP. He is the chair of the firmΓÇÖs Social Media Practice. He may be reached at david.bell@haynesboone.com or 214.651.5248. Follow David on Twitter or add him to your LinkedIn network.

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February 2012