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On February 22, and March 5, 1873, Barrett and Walton delivered to plaintiff … one hundred and forty tierces of lard, to be shipped …. On the night of March 14, while the lard was stored in defendant’s warehouse, awaiting shipment, it was destroyed by an accidental fire …. [S]aid goods put in said warehouse upon the agreement and understanding that the defendant should not be liable for a loss by accidental fire, was clearly made out. Such being the case, the common law liability is limited by this special agreement.

Some things have not changed since the fire of March 14, 1873. The competing interests of clients seeking convenient storage on one side against providers seeking protection from liability on the other continue to pervade the legal landscape. Naturally, some things have changed, such as the items being stored, the nature of the storage facilities, the associated risks, and the rules governing preservation obligations. Physical property has been replaced with electronically stored information (“ESI”) and warehouses now take the form of remote data servers. And in addition to longstanding conventional risks, such as accidental fire, companies now face very particularized risks resulting from e-discovery obligations imposed by the Federal Rules of Civil Procedure.

Businesses have continuously attempted to reduce their exposure to e-discovery liability by utilizing risk-mitigating ESI storage systems. Cloud computing has emerged as a promising solution to reduce the risk of data loss as well as to transfer data loss liability to the vendor. Naturally, cloud computing service providers have expanded the limited liability provisions in their contracts to shield themselves and transfer the risk back to their clients. E-discovery has thereby perpetuated the age-old battle over the balance of risk.

This article illustrates how, despite cloud computing’s theoretical advantages, the technology poses a variety of practical e-discovery risks for employers. Part I introduces cloud computing, plots out its inevitable integration into the workplace, and discusses its potential e-discovery advantages over conventional local data storage. Part II moves from the theoretical to the practical by applying a magnifying glass to Apple’s new cloud computing product, iCloud, and revealing the various e-discovery risks that still remain. Finally, Part III offers employers some recommendations for how to reconcile their interest in cloud computing with the risks that the technology presents. While the right choice might be different for each business, the considerations and risks discussed below apply broadly.