On December 1, 2006, the Federal Rules of Civil Procedure (FRCP) were amended to explicitly recognize that businesses have moved from the paper age to the electronic age. While some of the obligations imposed by these changes have been practiced under the prior version of the rules, others are brand new. The message that these rules convey is that potential litigants should be thinking about how complying with the amendments and production of electronically stored information (“ESI”) will affect their business before they are in a lawsuit.
As more and more records are created, used and stored electronically, litigants have been faced with not only the discoverability of their paper documents, but also the discoverability of their electronic documents and the supplemental issues that accompany them, such as: form of production, inadvertent disclosure, document archival and retention policies, and document deletion. While litigants have commonly defined the term “documents” to include electronically stored documents in their discovery papers, the practice of producing electronic documents has been far from uniform.
Over the past few years, federal courts have confronted electronic discovery issues and have interpreted the federal discovery rules as including ESI. Some courts have sanctioned both parties and their attorneys for not producing electronic information, even where the failure to produce was not motivated by a bad-faith intent. Some illustrative cases discussing electronic discovery include: Zubulake v. USB Warburg “Zubulake IV” (obligations regarding email stored on backup tapes), Phoenix Four v. Strategic Resources Corp. (failure to search servers), and Williams v. Sprint/United Mgmt Co. (failure to preserve metadata). These cases, along with others, have resulted in the creation of different standards in different jurisdictions, with each jurisdiction imposing its own electronic discovery rules on parties and their lawyers. The amendments to the FRCP are intended to establish more uniform standards to be applied in federal courts. The amendments now make clear that discovery in federal litigation includes ESI, regardless of the jurisdiction.
The New Provisions
Now that ESI is clearly discoverable under the amended rules, litigants must take a proactive approach to e-discovery issues by discussing these issues at an early stage of the litigation, when discovery planning takes place at the discovery conference. In addition to the early planning for discovery of ESI, the key provisions under the amendments primarily address the following topics:
- form of production of electronic documents;
- inadvertent disclosure of confidential information in an electronic document;
- accessibility of electronic information; and
- safe harbor provision for documents destroyed in the routine course of business.
While ESI refers to “electronically” stored information, in practice it will likely be interpreted to be inclusive of all electronically created, stored or accessed media. For example, while a CD is an optical storage medium, it will likely be considered discoverable as falling within ESI because of the electronic processes involved in creating and accessing the information.
Rules 16(b) and 26(f) require that litigants address ESI discovery issues and that they do so at the beginning of the case. The consideration of these issues begins with the initial “meet and confer” between the parties when they now must make sure to address “issues relating to the disclosure or discovery of electronically stored information” and continues through the pretrial conference. Scheduling orders may include “provisions for disclosure or discovery of electronically stored information” and this will likely become the norm. Because the new rules require attorneys to address ESI issues at the beginning of the discovery process of litigation, litigants will have to be proactive regarding e-discovery issues, even before suits are filed. Consistent with these early, proactive obligations, litigants now have to include the location and category of ESI in their initial disclosures under Rule 26(a)(1)(B).
Rules 26(f)(3) and 34(b) incorporate new provisions relating to the form of production of electronic documents. Essentially, these rules permit a party to specify the form in which electronic documents will be produced. Absent a requesting party’s specification, the producing party will respond with the form it intends to use in the production of documents.
Form of production can become an important matter in discovery. Electronic documents can be produced in a variety of forms which, depending on the form, may contain meta-data (embedded information about the document). With the incorporation of the new provision in Rule 34, the form in which electronic documents are produced can limit the amount and types of information a party produces. The form of the documents governs whether produced documents include meta-data and the ease and ability of the adversary to search documents.
While the form of ESI that a litigant is required to produce can be very significant, a new provision in Rule 26 seeks to protect a party in discovery by limiting the burden of production of electronic information an adversary can request, regardless of its form. A party may identify ESI as “not reasonably accessible” because of “undue burden or cost” under Rule 26(b)(2)(B). This is not necessarily an easy way out of the obligation to produce ESI, because even if a party shows that the information is not reasonably accessible because of undue burden or cost, the court may still order discovery upon a showing of good cause. As with other aspects of the amendments, this is one that will be ripe for interpretation by the courts.
Another change in the rules involves the potential need for agreements relating to inadvertent disclosure of confidential information (i.e. “Clawback agreements”). Due to the electronic and mobile nature of modern business, more documents are generated and more copies of documents are stored, which in turn increases the possibility of inadvertent disclosure of confidential information during production. For example, if it is common for a business to include many people on email circulations, even where privileged information is involved, it is possible that during production of documents, an email from one of these many recipients may be inadvertently disclosed.
Rule 26(b)(5)(B) states the actions a party may take in the event privileged information is produced. This rule does not decide whether the privilege attached to the confidential information is ultimately waived. The rule merely sets forth procedures that parties must follow if confidential information is produced. As a practical matter, this rule serves to raise awareness of the possibility of inadvertent disclosure, and the need for litigants to create an agreement early on to address the situation if and when it arises.
Rule 37 has been amended to incorporate a safe harbor provision with regard to sanctions. This new provision serves two purposes. First, it extends a safe harbor to companies who have deleted information in the routine course of business. Second, because this provision assumes that companies have document archival procedures in place, it stresses not only the importance of having a document archival policy, but also serves as a warning to companies who are not following or do not have a policy in place.
My Company is Not in Litigation, so Why Should I Care about These Rules?
Forward thinking and anticipation is the key. While every company officer hopes that their company will not be in litigation, it is tough to avoid the fact that litigation is often part of the cost of doing business. Awareness of the issues raised in the amendments, and implementation of document policies and practices may help a company minimize its risks of inadvertent disclosure and costs of litigation in the event that a lawsuit becomes a reality. Efficient and effective policies and practices which are followed can protect your company from disclosure of unnecessary information, help decrease the cost of discovery, and avoid sanctions for failure to retain discoverable ESI.
Discovery is a very expensive part of litigation, and the document review process (including the review of outgoing and incoming documents) plays a role in this area. With the ease of electronic communication and the decreasing costs of memory and storage media, the volume of documents a company accumulates has become massive. More and more individuals within a company maintain their own copies of documents, particularly emails and attachments. Some companies have become more diligent in data backup/restoration procedures in an effort to safeguard information in the event of a system crash. With all of this storage taking place, a failure to have in place or strictly follow a document retention and destruction procedure will likely increase the amount of documents that need to be reviewed by your lawyers and potentially increase the number of documents that an adversary can discover.
In order to keep costs of litigation down and retain control of the amount and types of discoverable information, a company should assess its IT system, document archival/retention policies and data backup/restoration procedures. This includes looking at the system in place to determine: 1) whether the IT system is even designed to follow the document policy in place; 2) whether employees are strictly following the company’s policy; and 3) whether there are multiple, conflicting policies in place.
Every company should try to assess it’s IT system and determine whether the document policy is even amenable to the system. For example, a policy may be in place which requires archival or deletion of files by the IT department, after a certain amount of time has passed, without any provision for deletion from a users workstation or laptop. While a document may be capable of an automatic deletion from the servers, not all systems allow for an automatic deletion from an individual user’s workstation.
Further, although data restoration is a necessity in this electronic age, data restoration should be used for its specific purpose – usually to restore the system in the event of a system crash or other failure. Thus, it should be crafted to reflect the appropriate amount of time to account for its intended purpose.
While the new provisions in the FRCP are designed to manage discovery in federal litigation, the reality is that they will serve as a constant reminder for businesses to implement, review and enforce their document storage, retention and destruction policies to not only meet their business needs, but also, to minimize their costs and risks in litigation.