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All this week we're reporting on email - today email and the law. One incriminating message can spell a big loss for a company involved in a lawsuit. On the other hand, a company who can't produce a key email in court could be even worse off. What's a business to do? NPR's Ari Shapiro reports.

ARI SHAPIRO: If you're thinking about enrolling in law school, listen up. Ken Withers is director of judicial education at a legal think tank called the Sedona Conference.

Mr. KEN WITHERS (Sedona Conference): Today a young person graduating from law school and joining a large firm in one of our major cities can look forward to perhaps three or four years of doing nothing but sitting in front of a computer screen reviewing email and other electronic documents for litigation.

SHAPIRO: This is the modern legal landscape, where by some estimates more than 90 percent of a cost of a lawsuit can come from sifting through emails and other electronic documents. Withers says in the old days, maybe 20 years ago, a case that involved 300,000 pieces of paper was considered huge.

Mr. WITHERS: That's considered a drop in the bucket today. The equivalent of 30 million or 300 million pieces of paper, if these were printed out, would not be unusual.

SHAPIRO: That may seem daunting, but it does carry an advantage. Electronic documents are much more searchable than paper documents. In fact, some companies now have proactive filters that can catch troublesome e-mails before anybody files a lawsuit.

Cyndy Launchbaugh is with ARMA International, a nonprofit association that deals with records management.

Ms. CYNDY LAUNCHBAUGH (ARMA International): For instance, in the financial industry, one example might be the word guarantee - you know, guarantee a return on something. They're not going to put the company on the line for something like that because it can't uphold it. And it could come back and bite them later, obviously.

SHAPIRO: So if the word guarantee pops up in a company email someone might check to make sure employees aren't promising something that they can't deliver. But many companies aren't that organized. ARMA cosponsored a study last year that found one in four American companies does not have a system for organizing electronic documents.

That system might tell companies what they keep, what they get rid of and how to archive things if they need to go back and find the documents in a lawsuit. But if a business without a system gets sued, it can cost a fortune.

Mr. DAVE MCDERMOTT (Records Manager): It can get into the millions.

SHAPIRO: Dave McDermott is a records manager for J.R. Simplot, an agribusiness company based in Idaho that does have a records management policy. Simplot created that that policy because 40 years ago federal investigators came asking for documents.

Mr. MCDERMOTT: And we didn't manage our information. Our records were stored in horse barns.

SHAPIRO: McDermott suspects many companies only get on the electronic records management bandwagon after they've been sued once.

Today a massive company the size of Simplot may juggle 300 or 400 court cases at a time. Each case requires its own set of documents that has to be retrieved and sorted. The industry calls it production. When a company that does not manage its e-mail gets sued, McDermott says...

Mr. MCDERMOTT: Many cases are settled because the cost of production outweighs the cost of settling.

SHAPIRO: In other words, when a company has to choose between spending millions of dollars on sorting e-mail and spending a few hundred thousand to settle a case, they may just pay the plaintiff to make the lawsuit go away. After that, the company's next step may well be to establish a comprehensive electronic document management policy.

Ari Shapiro, NPR News.

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