E- DISCOVERY RULES FEDERAL COURT 2007

Transcription

1 E- DISCOVERY RULES FEDERAL COURT 2007 TABLE OF CONTENTS I. INTRODUCTION...1 II. THE GENESIS AND NEED FOR THOSE AMENDMENTS...1 III. A Case Study Zubulake...3 Facts of Zubulake...4 Discovery of Records on Electronic Medium ---- Zubulake I...5 Cost Shifting ---- Zubulake I & III...7 Retention of Records Duty of Parties Zubulake IV...10 Counsel's Obligation to Ensure the Retention of Documents ---- Zubulake V...13 Counsel's Duty to Locate Relevant Information...14 Counsel's Duty to Ensure Preservation...15 Remedies for Failure to Retain Documents ---- Zubulake V...16 THE 2006 AMENDMENTS FOR ELECTRONICALLY STORED INFORMATION...16 IV. IMPACT OF AND COMPLIANCE WITH THE 2006 AMENDMENTS...19 A. Planning Meeting, Scheduling Conference/Initial Disclosures Planning Meeting Scheduling Conference Initial Disclosures Necessity of Dealing with Electronically Stored Information from the Outset B. Accessibility of Electronically Stored Information...24 C. Cost Shifting...28 D. Provisions re Privilege Waivers...29

2 E. Production of Electronically Stored Information In Lieu of Answering an Interrogatory...33 F. Form of Production of Electronically Stored Information Requests for Production Responses to Production Requests...35 G. Rule 37 Sanctions...36 H. Subpoenas for Electronically Stored Information V. CONCLUSION...39

3 E- DISCOVERY RULES FEDERAL COURT 2007 I. INTRODUCTION Effective December 1, 2006, the Federal Rules of Civil Procedure, specifically Rules 16, 26, 33, 34, 37 and 45, were amended to explicitly deal with a category of information which the amended rules refer to as electronically stored information. 1 These amendments had been under consideration for several years and were adopted by order of the U.S. Supreme Court on April 12, The amendments make explicit the obligation of the parties and counsel to consider electronically stored information in connection with discovery in federal court and to begin doing so at the earliest stages of the litigation. The Advisory Committee Notes make clear that the phrase electronically stored information is meant to be expansive and includes any type of information that is stored electronically. Note to Rule 34(a). References to electronically stored information are meant to invoke this expansive approach wherever that phrase appears in the rules. Furthermore, references to documents that appear in discovery rules that are not amended should be interpreted to included electronically stored information as circumstances warrant. Id. II. THE GENESIS AND NEED FOR THOSE AMENDMENTS Discovery of information created, maintained and/or stored on electronic media (often referred to as e-discovery ) has been one of the hot topics in legal literature for the past few years. Lawyers (many of us belatedly) are recognizing and courts, even before the 2006 amendments to the rules, have been and are enforcing the obligation to include such 1 Both the amendments to these rules and the Advisory Committee s Notes on the amendments can be found on-line at 1

4 materials in discovery responses, including the initial disclosures. This obligation should come as no surprise. The Federal Rules of Civil Procedure, since at least 1970, have included electronic data within the scope of discovery. In this regard, the 1970 Advisory Committee Notes to Rule 34 state: The inclusive description of "documents" is revised to accord with changing technology. It makes clear that Rule 34 applies to electronic data compilations from which information can be obtained only with the use of detection devices, and that when the data can as a practical matter be made usable by the discovering party only through respondent's devices, respondent may be required to use his devices to translate the data into usable form. Furthermore, the boilerplate definitions that virtually every Hawaii attorney appends to his or her written discovery requests typically contain a definition of documents that specifically includes electronic data. As a result, even before the 2006 amendments to the rules, it was "black letter law that computerized data is discoverable if relevant." Anti-Monopoly, Inc. v. Hasbro, Inc.,1995 WL , *2 (S.D.N.Y.1995). Indeed, computer records, including records that have been deleted, are records discoverable under Fed. R. Civ. P. 34. Simon Property Group v. mysimon, Inc., 194 F.R.D. 639, 640 (S.D. Ind. 2000)(emphasis added). What is making electronic discovery so important and, therefore, such a hot topic is the exponential growth in the use of and the implementation by business of backup systems for electronic data. 2 As the federal Judicial Conference s Committee on Rules of Practice and Procedure noted in its Summary of the Report of the Judicial Conference Committee on Rules of Practice and Procedure (September 2005)(hereinafter Jud. Comm. 2 Actions by the federal government regulations also mandate backup of such data in many instances. See HIPAA (the Health Insurance Portability and Accountability Act) Compliance Regulation which requires disaster recovery plans for data in the health industry; Sarbanes-Oxley Act of 2000 for all publicly traded companies; the Gramm-Leach-Bliley Act for the banking and financial industries. 2

5 Rept. ): 3 Jud. Comm. Rept. at A Case Study Zubulake The discovery of electronically stored information raises markedly different issues from conventional discovery of paper records. Electronically stored information is characterized by exponentially greater volume than hard-copy documents. Commonly cited current examples of such volume include the capacity of large organization computer networks to store information in terabytes, each of which represents the equivalent of 500 million typewritten pages of plain text, and to receive 250 to 300 million messages monthly. Computer information, unlike paper, is also dynamic; merely turning a computer on or off can change the information it stores. Computers operate by overwriting and deleting information, often without the operator s specific direction or knowledge. A third important difference is that electronically stored information, unlike words on paper, may be incomprehensible when separated from the system that created it. The most often referenced case in the many discussions of electronic discovery is one from the Southern District of New York, Zubulake v. UBS Warburg LLC. 4 This case has resulted in seven published opinions. Four of those decisions have relevance to the present discussion: 217 F.R.D. 309 (S.D.NY. 2003)( Zubulake I ); 216 F.R.D 280 (S.D.N.Y. 2003)( Zubulake III ); 220 F.R.D. 212 (S.D.N.Y. 2003)( Zubulake IV ); and 2004 WL 2005.pdf. 3 The report is available at One commentator has said: If you can t spell Zubulake, you probably shouldn t be in the courtroom. Michael Clerk of DDDix LLC, quoted in Jason Krause, Don t Try This At Home: Doing E-Discovery Is Best Left to Outside Experts, ABA Journal, March

6 (S.D.N.Y. 2004)( Zubulake V ). 5 The Zubulake decisions, in the order that one would expect, discuss the discoverability of electronic data; when the burden of the cost of such discovery can and should be shifted, in whole or part; the responsibility of parties and counsel to locate and retain pertinent records; and the imposition of sanctions for failure to retain or produce such records. These decisions have continuing importance even after the adoption of the 2006 amendments because (a) the decisions anticipated many of the amendments and (b) they have been cited by in excess of thirty published decisions of federal courts since the effective date of the amendments. Facts of Zubulake The case may be described as a somewhat garden variety sexual discrimination case. 6 The plaintiff had been a female employee of the defendant. She believed that she had been passed over for promotion and otherwise mistreated because she was a woman. In August 2001, she filed a complaint with the EEOC, and two weeks later the defendant employer fired her. There are, however, several factors in the case that make it something more than a garden variety discrimination case. Those other factors include: 1. The amount in controversy: Ms. Zubulake was a highly paid employee, with her salary at the time of her termination being at least $550,000 a year, and, if she is awarded full back and front pay, being entitled to as much as $13,000,000 in 5 The district judge handling the Zubulake case, Judge Scheindlin, is the one responsible for the numbering of the decisions. There have also been three other decisions in Zubulake: 2003 WL (S.D.N.Y. 2003)( Zubulake II )(denying plaintiff s motion to permit her to release a deposition transcript to SEC); 2005 WL (S.D.N.Y.2005)(which deals with motions in limine) and 2005 WL (S.D.N.Y. 2005)(denying motion to assert new affirmative defense). None of these is relevant to the present discussion. 6 Judge Scheindlin described that case as a relatively routine employment discrimination dispute. Zubulake V, 2004 WL *1. 4

7 damages, not including punitive damages or attorneys fees. 217 F.R.D. at 312, n The defendant initially insisted that it had fully responded to plaintiff s discovery requests. The plaintiff knew, and was able to demonstrate to the court at early stages of the case, that this assertion was false, and the court concluded from the start that the defendant had failed to conduct an adequate search for responsive s. 217 F.R.D. at The defendant was unable to adjust its conduct to conform with the judge s expectations, with the defendant s position becoming progressively worse and the judge s reaction progressively stronger from decision to decision. 4. Judge Scheindlin, in addition to sprinkling her opinions with literary references, 8 had established views on the subject of electronic discovery, having expressed such views in 2000 as a co-author of a law review article, 9 and demonstrated no reluctance to decide issues and to enforce her decisions. Discovery of Records on Electronic Medium ---- Zubulake I The court, in Zubulake I, granted the plaintiff s motion to compel the defendant to produce relevant s. In doing so, the court reiterated the general principles of discovery: 7 References in subsequent decisions place Ms. Zubulake s income at approximately $650,000 a year. Zubulake III, 216 F.R.D. at 281; Zubulake IV, 220 F.R.D. at With, for example, quotes from Henry David Thoreau ( [t]he process of discovery if very simple. 217 F.R.D. at 311), Phillip Roth ( The English language is a form of communication!...words aren t only bombs and bullets no, they re little gifts, containing meanings! 2004 WL *1), the prison captain in Cool Hand Luke ( What we ve got here is a failure to communicate. Id.) 9 Shira A. Scheindlin & Jeffrey Rabkin, Electronic Discovery in Federal Court Litigation: Is Rule 34 Up to the Task?, 41 B.C.L.Rev 327 (2000). In this article, the authors argue that Rule 34, prior to the amendments, was not up to the task. In particular, and among other points, the authors assert the need for specific provisions in the rules dealing with electronically stored information in order for there to be uniformity throughout the federal courts. 5

8 1. Subject to recognized privileges, discovery permits the parties to obtain the fullest possible knowledge of the issues and facts before trial. 217 F.R.D. at 315, quoting Hickman v. Taylor, 329 U.S. 495, , 67 S.Ct. 385, 91 L.Ed. 451 (1947)(Judge Scheindlin s italics). 2. Quoting from Rule 26(b)(1), [p]arties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party F.R.D. at , court s italics Rule 26(b)(2) imposes general limitations on the scope of discovery in the form of a proportionality test... Id. at 316. Rule 26(b)(2) requires that the court limit the frequency or extent of use of the discovery methods if the court determines that: Id., quoting F.R.Civ.P. 26(b)(2). (i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. 4. The presumption is that the responding party must bear the expense of complying with discovery requests. Rule 26(c), however, empowers the court with discretion to grant orders protecting a party from undue burden and expense. Id., quoting from Oppenheimer fund, Inc. v. Sanders, 437 U.S. 340, 358, 98 S.Ct. 2380, 57 L.Ed.2d 253 (1978) [e]lectronic documents are no less subject 6

9 to disclosure than paper records. This is true not only of electronic documents that are currently in use, but also of documents that may have been deleted and now reside only on backup disks. Id. at 317, quoting from Rowe Entertainment, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421, 428 (S.D.N.Y. 2002). Applying these principles, Judge Scheindlin, in Zubulake I, ordered [the defendant] to produce all responsive s that exist on its optical disks or on its active servers... [and] responsive s from any five backups [sic] tapes selected by Zubulake. Cost Shifting ---- Zubulake I & III In Zubulake I, the defendant urged the court to shift the cost of its production to the plaintiff, claiming that this was necessary to protect [it]...from undue burden or expense. 217 F.R.D. at 317. In considering this request, Judge Scheindlin again set forth the general principles to be considered. 1. The first question...is whether cost-shifting must be considered in every case involving the discovery of electronic date, which - in today s world, includes virtually all cases. In light of the accepted principle...that electronic evidence is no less discoverable than paper evidence, the answer is, No. The Supreme Court has instructed that the presumption is that the responding party must bear the expense of complying with discovery requests... Any principled approach to electronic evidence must respect this presumption. Id., inner quote from Oppenheimer fund, Inc. v. Sanders, 437 U.S. 340, 358, 98 S.Ct. 2380, 57 L.Ed.2d 253 (1978). In order to maintain the presumption that the 7

10 responding party pays, the cost-shifting analysis must be neutral; close calls should be resolved in favor of the presumption. 217 F.R.D. at [C]ost-shifting should be considered only when electronic discovery imposes an undue burden or expense on the responding party. The burden or expense of discovery is, in turn, undue when it outweighs its likely benefit taking into account the needs of the case, the amount in controversy, the parties resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. Id. at 318; court s italics, footnotes omitted. 3. It makes no sense to automatically assume an undue burden or expense simply because electronic evidence is involved. Id., footnote omitted. Electronic evidence is frequently cheaper and easier to produce than paper evidence because it can be search automatically, key words can be run for privilege checks, and the production can be made in electronic form obviating the need for mass photocopying. 4. [W]hether production of documents is unduly burdensome or expensive turns primarily on whether it is kept in an accessible or inaccessible format...[i]n the world of electronic data, thanks to search engines, any data that is retained in a machine readable format is typically accessible. Whether electronic data is accessible or inaccessible turns largely on the media on which it is 8

11 stored. Id.; court s italics, footnote omitted. There are five types of storage for electronic data: (a) active, online data, (b) near-line data, (c) offline storage/archives, (d) backup tapes, and (e) erased, fragmented or damaged data. Id. at ; footnotes omitted. Of these, the first three categories are typically identified as accessible, and the latter two as inaccessible. The difference between the two classes is easy to appreciate. Information deemed accessible is stored in readily usable format. Although the time it takes to actually access the data ranges from milliseconds to days, the data does not need to be restored or otherwise manipulated to be usable. Inaccessible data, on the other hand, is not readily usable. Backup tapes must be restored..., fragmented data must be de-fragmented, and erased data must be reconstructed, all before the data is usable. That makes the data inaccessible. 5. [C]ost-shifting is potentially appropriate only when inaccessible data is sought. When a discovery request seeks accessible data for example, active on-line or near-line data it is typically inappropriate to consider costshifting. Zubulake III, 216 F.R.D. at 284; court s italics. Judge Scheindlin concluded that there are seven factors for the court to consider in determining whether or not to shift the burden of producing inaccessible electronic records. Those factors, according to Judge Scheindlin, are: a. The extent to which the request is specifically tailored to discover relevant information; 9

12 b. The availability of such information for other sources; c. The total cost of production, compared to the amount in controversy; d. The total cost of production, compared to the resources available to each party; e. The relative ability of each party to control costs and its incentive to do so; f. The importance of the issues at stake in the litigation; and g. The relative benefits to the parties of obtaining the information. Id. at 322. In Zubulake I, Judge Scheindlin did not decide whether or not to shift the cost burden of the defendant s production from its backup tapes. The judge did, however, direct the defendant to prepare an affidavit detailing the results of its search, as well as the time and money spent and promised, after review of that material, to conduct the appropriate costshifting analysis. Id. at 324. The cost-shifting question was revisited, as the judge had promised, in Zubulake III. As directed by the court, counsel for the defendant submitted a declaration stating that the cost to restore and search the tapes was $165, and that the sum of $107, was incurred in attorney and paralegal review costs. The judge considered the seven cost-shifting factors that she enumerated in Zubulake I, determined that some cost sharing was appropriate, and ruled that Ms. Zubulake must pay 25% of the cost to restore and search the tapes, but the defendant would be solely responsible for the attorney and paralegal review costs. 216 F.R.D. at 291. Retention of Records Duty of Parties Zubulake IV In Zubulake IV, Judge Scheindlin considered the duty of parties to retain documents during the pendency of litigation. Part of the outcome of the defendant s efforts to comply 10

13 with the judge s earlier discovery orders was the discovery that some of the backup tapes were missing and some of the sought after s had been deleted. Not surprisingly, Ms. Zubulake sought the imposition of sanctions, including: (a) an order relieving Ms. Zubulake from the judge s earlier decision that she pay 25% of the cost to restore and search the tapes, (b) an adverse inference instruction, and (c) an order that the defendant bear the cost of re-deposing certain witnesses regarding issues raised in newly produced s. 220 F.R.D. at Id. at 214. In response to Ms. Zubulake s request, Judge Scheindlin first noted: Finding a suitable sanction for the destruction of evidence in civil cases has never been easy. Electronic evidence only complicates matters. As documents are increasingly maintained electronically, it has become easier to delete or tamper with evidence (both intentionally and inadvertently) and more difficult for litigants to craft policies that ensure all relevant documents are preserved. The judge noted that parties have a duty to preserve evidence relevant to litigation and to anticipated litigation. Id. at 216. As to the scope of that duty, a corporation, recognizing the threat of litigation, is not required to preserve every shred of paper, every or electronic document, and every backup tape... Id. at 217. At the same time, anyone who anticipates being a party 10 or is a party to a lawsuit must not destroy unique, relevant evidence that might be useful to an adversary. While a litigant is under no duty to keep or retain every document in its possession...it is under a duty to preserve what it knows, or reasonably should know, is relevant in the 10 Judge Scheindlin s view that the duty to preserve relevant documents when one anticipates litigation is not a novel one. Many other courts have so held. See, e.g., Kronisch v. United States, 150 F.3d 112, 127 (2 nd Cir. 1998)(evidence that a party is worried about litigation may be sufficient to trigger the duty to preserve); William T. Thompson Co. v. General Nutrition Corp., 593 F.Supp. 1443, 1455 (C.D. Cal. 1984). 11

14 Id., footnote omitted. action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request. [T]he duty to preserve extends to those employees likely to have relevant information the key players in the case. Id. at 218. Summing up the obligation, the judge stated: Id., court s italics. Once a party reasonably anticipates litigation, it must suspend its routine document/destruction policy and put in place a litigation hold to ensure the preservation of relevant documents. As a general rule, that litigation hold does not apply to inaccessible backup tapes (e..g., those typically maintained solely for the purpose of disaster recovery), which may continue to be recycled on the schedule set forth in the company s policy. On the other hand, if backup tapes are accessible (i.e. actively used for information retrieval), then such tapes would likely be subject to the litigation hold. However, it does make sense to create one exception to this general rule. If a company can identify where particular employee documents are stored on backup tapes, then the tapes storing the documents of key players to the existing or threatened litigation should be preserved if the information contained on those tapes is not otherwise available. This exception applies to all backup tapes. Based upon the evidence then available to her, Judge Scheindlin, in Zubulake IV, declined to modify her earlier decision regarding cost-shifting, decided that an adverse inference instruction was not appropriate, but ordered that the defendant bear the costs of the additional depositions. 220 F.R.D. at 222. Counsel s Obligation to Ensure the Retention of Documents ---- Zubulake V Having decided, in Zubulake IV, the scope of the obligation of parties to retain 12

15 documents, Judge Scheindlin, in Zubulake V, addressed 2004 WL at *1....counsel s obligation to ensure that relevant information is preserved by giving clear instructions to the client to preserve such information... It is the judge s consideration of this issue that is probably the reason for most of this case s notoriety. Zubulake V arose because, during the re-deposition of witnesses required by Zubulake IV, Ms. Zubulake learned about more deleted s and about s on the defendant s active servers that had not been produced. The facts in regard to the issue of counsel s responsibilities in regard to the retention of records, as Judge Scheindlin saw them, were: Id. 1. Early on in the litigation, defendant s counsel, both in-house and outside, instructed defendant s personnel to retain relevant electronic information; 2. Notwithstanding these instructions: a. Certain of defendant s employees deleted relevant s; b. Other employees never produced relevant information to counsel; 3. Counsel failed to request retained information from one key employee, failed to give the litigation hold instructions to another, failed to adequately communicate with another employee about how she maintained her computer files, and failed to safeguard backup tapes that might have mitigated the damage done by the deletion of s. Judge Scheindlin concluded that, in addition to advise his or her client about its litigation hold obligation, as set forth in Zubulake IV, counsel must monitor the client s compliance with its litigation hold obligations. A party s discovery obligations do not end with the implementation of a litigation hold to the contrary, that s 13

16 Id. at *7. only the beginning. Counsel must oversee compliance with the litigation hold, monitoring the party s efforts to retain and produce the relevant documents. Encompassed in counsel s duty to monitor are: 1. Counsel s Duty to Locate Relevant Information Once a litigation hold is in place, a party and her counsel must make certain that all sources of potentially relevant information are identified and place on hold... To do this, counsel must become fully familiar with her client s document retention policies, as well as the client s data retention architecture. This will invariably involve speaking with information technology personnel, who can explain system-wide backup procedures and the actual...implementation of the firm s recycling policy. It will also involve communicating with key players in the litigation in order to understand how they store information.... In short, it is not sufficient to notify all employees of a litigation hold and expect that the party will then retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched. This is not to say that counsel will necessarily succeed in locating all such sources, or that the later discovery of new sources is evidence of a lack of effort. but counsel and client must take some reasonable steps to see that sources or relevant information are located. Id. at *8; court s italics, bold emphasis added. 14

17 2. Counsel s Duty to Ensure Preservation Because the lawyer, not the client, understands the significance [of discovery responses] and bears the responsibility to bring answers up to date, the lawyer under a continuing burden must periodically recheck all interrogatories and canvass all new information. Id. at *9. The continuing duty to supplement disclosures strongly suggests that the parties also have a duty to make surer that discoverable information is not lost. Indeed, the notion of a duty to preserve connotes an ongoing obligation. Obviously, if information is lost or destroyed, it has not been preserved. Id., court s italics, footnotes omitted. Thus, the judge concludes, there are a number of steps that Counsel should take to ensure compliance with the preservation obligation. Id. Those steps include: a. Counsel must issue a litigation hold at the outset of litigation or whenever litigation is reasonably anticipated. b. Counsel must communicate directly and clearly with key players in the litigation regarding the importance of the preservation duty and must periodically remind those key players of the duty. c. [C]ounsel should instruct all employees to produce copies of their relevant active files. Counsel must also make sure that all backup media which the party is required to retain is identified, stored in a safe place and/or segregated from others. Id. at *9-10. Remedies for Failure to Retain Documents ---- Zubulake V 15

18 Having determined that the defendant was under a duty to preserve s and that it had deleted presumably relevant s wilfully, the judge then considered appropriate sanctions. She concluded that the following sanctions were warranted: Id. at *13. III. wrote: Id. at * The jury will be given an adverse inference instruction regarding those s deleted after Ms. Zubulake filed her EEOC complaint; 2. The defendant will be required to pay the costs of any deposition or redepositions required by its late production; 3. The defendant must pay the cost of this motion; and 4. The judge noted that the final sanction was a self-executing one, namely that, because the defendant was unable to prepare deponents regarding information disclosed on late discovered and produced s, some of those witnesses have already testified in a manner contradicted by the newly discovered s. THE 2006 AMENDMENTS FOR ELECTRONICALLY STORED INFORMATION Judge Scheindlin, in what she titled a Postscript to her decision in Zubulake V, Now that the key issues have been addressed and national standards are developing, parties and their counsel are fully on notice of their responsibility to preserve and produce electronically stored information.... This Court, for one is optimistic that with the guidance now provided it will not be necessary to spend this amount of time again. It is hooped that counsel will heed the guidance provided by these resources and will work to ensure that preservation, production and spoliation issues are limited, if not eliminated. 16

19 The Zubulake decisions, as well as decisions in other similar cases, 11 resulted in amendments to the Federal Rules of Civil Procedure which became effective on December 1, These amendments deal with electronically stored information and include amendments to the following rules: Rule 16: The amendment requires that both the parties and the court address at the scheduling conference stage issues pertaining to the disclosure and discovery of electronic information. The court has the discretion to include in its scheduling orders procedures for disclosure or discovery of electronically stored information. Rule 26: Parties are required to include electronically stored information with their initial disclosures. Rule 26(b)(2)(B). Parties are excused, at least initially, from providing discovery of electronically stored information that is not reasonably accessible because of undue burden or cost. Rule 26(b)(2)(B). But, the producing party has the obligation to make such a showing, and the requesting party may then move to compel preservation or production. Provides a procedure that may protect the privilege in materials 11 See, for example, Phoenix Four, Inc. v. Strategic Resources Corp., 2006 WL (S.D.N.Y. 2006); Coleman (Parent) Holdings Inc. v. Morgan Stanley, Inc., 2005 WL and 2005 WL (Fla.Cir.Ct. 2005)(Morgan Stanley s discovery failures found to be deliberate and in bad faith, justifying an adverse inference and an instruction from the court that the jury that it could assume that Morgan Stanley permitted fraud, all resulting in an award to plaintiff of $1.4 billion); U.S. v. Philip Morris USA, Inc., 327 F.Supp.2d 21, 26 (D.D.C. 2004)(failure to preserve electronically stored information in compliance with the court s order and the company s own document-retention policy resulted in almost $2.75 million in sanctions and barred corporate officers from testifying at trial.) 17

20 inadvertently produced. Rule 26(b)(5)(B). Rule 33: Specifically includes electronically stored information in Rule 33(d) within the option to produce business records when responding to interrogatories. Rule 34: Now includes a specific reference to electronically stored information ( documents or electronically stored information including writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations stored in any medium from which information can be obtained translated, if necessary, by the respondent into reasonably usable form... ) Rule 34(a). The format in which the electronically stored information must be produced may be specified: Initially, the party making [t]he request may specify the form or forms in which electronically stored information is to be produced. Rule 34(b). [I]f a request does not specify the form or forms for producing electronically stored information, a responding party must produce the information in a form or forms in which it is ordinarily maintained or in a form or forms that are reasonably usable. Rule 34(b)(ii). [A] party need not produce the same electronically stored information in more than one form. Rule 34(b) (iii). Rule 37: The amendment creates a "safe harbor" that protects a party from sanctions for failing to provide electronically stored information lost because of the routine operation of the 18

21 IV. Rule 45: party's computer system. Specifically includes electronically stored information within the material that may be subpoenaed, with provisions that substantially track Rule 34. IMPACT OF AND COMPLIANCE WITH THE 2006 AMENDMENTS A. Planning Meeting, Scheduling Conference/Initial Disclosures With the 2006 amendments, issues pertaining to electronically stored information must be considered at the earliest stage of litigation. 1. Planning Meeting Rule 26(f) of the Federal Rules of Civil Procedure deals with the parties planning meeting (which must occur at least 21 days prior to the scheduling conference with the court) and requires that all parties give immediate consideration to issues pertaining to the discovery of electronically stored information. In this regard, the rule requires counsel to, inter alia, discuss any issues relating to preserving discoverable information, and to develop a proposed discovery plan that indicates the parties' views and proposals concerning: *** (3) any issues relating to disclosure or discovery of electronically stored information, including the form or forms in which it should be produced; (4) any issues relating to claims of privilege or of protection as trial-preparation material, including - if the 19

22 parties agree on a procedure to assert such claims after production 12 - whether to ask the court to include their agreement in an order... Emphasis added. 2. Scheduling Conference Consistent with the provisions of Rule 26(f) quoted above, Rule 16(b) of the Federal Rules of Civil Procedure states specifically that the scheduling order entered by the court may include, inter alia, (5) provisions for disclosure or discovery of electronically stored information; (6) any agreements the parties reach for asserting claims of privilege or of protection as trial-preparation material after production Initial Disclosures Within 14 days after the planning conference required by Rule 26(f), and, thus, before the scheduling conference with the court, Rule 26(a)(1) of the Federal Rules of Civil Procedure requires that all parties, simultaneously, provide the others with their initial disclosures. Pursuant to the 2006 amendments, those disclosures must now include, inter alia: (B) a copy of, or a description by category and location of, all documents, electronically stored information, and tangible things that are in the possession, 12 Procedures for consideration of claims of privilege after production are now being referred to as clawback provisions and are discussed further at Section IV.D, infra. 20

23 custody, or control of the party and that the disclosing party may use to support its claims or defenses, unless solely for impeachment... Emphasis added. The Advisory Committee Notes describes what it means for a party to "use"document to support a claim or defense. "Use" by a party, includes any use at a pretrial conference, to support a motion, or at trial. The disclosure obligation is also triggered by intended use in discovery, apart from use to respond to a discovery request; use of a document to question a witness during a deposition is a common example. The disclosure obligation attaches both to witnesses and documents a party intends to use and also to witnesses and to documents the party intends to use if -- in the language of Rule 26(a)(3) "the need arises." This definition is relatively straightforward. Either a party is going to introduce a particular document, including electronically store information., into the litigation or not. If so, the document, including electronically store information, must be disclosed or the exclusion sanction of Rule 37(c)(1) of the Federal Rules of Civil Procedure can result. On the other hand, a party is not obligated to disclose witnesses or documents, whether favorable or unfavorable, that it does not intend to use. Id. The disclosure obligation applies to claims and defenses and therefore requires a party to disclose information it may use to support its denial or rebuttal of the allegations, claim, or defense of another party. Id. Rule 26(g)(1) requires that the attorney for the disclosing party make a reasonable inquiry into the facts of the case, and to certify that to the best of his or her "knowledge, information, and belief... the disclosure is complete and correct" when made. The Advisory Committee Notes for the 1993 amendments state that counsel is required to 21

24 make an inquiry that is reasonable under the circumstances, focusing on the facts that are alleged with particularity in the pleadings. Rule 26(g)(1) provides that: Every disclosure made... shall be signed by at least one attorney of record in the attorney's individual name, whose address shall be stated.... The signature of the attorney... constitutes a certification that to the best of the signer's knowledge, information, and belief, formed after a reasonable inquiry, the disclosure is complete and correct as of the time it is made. Rule 26(g) imposes on counsel an affirmative duty to engage in pretrial discovery responsibly and "is designed to curb discovery abuse by explicitly encouraging the imposition of sanctions." Fed.R.Civ.P. 26(g) Advisory Committee Notes to 1993 Amendment. Furthermore, the Rule Id. provides a deterrent to both excessive discovery and evasion by imposing a certification requirement that obliges each attorney to stop and think about the legitimacy of a discovery request, a response thereto, or an objection. The term "response" includes answers to interrogatories and to requests to admit as well as responses to production requests. 4. Necessity of Dealing with Electronically Stored Information from the Outset The ideas behind these amendments to Rules 16(b), 26(f) and 26(a)(1), are (a) to prevent attorneys from tacitly agreeing not to consider issues pertaining to the discovery of electronically stored information because they do not understand it or dealing with it is expensive and (b) to reduce the number of cases where the failure to discuss these 22

25 issues resulting in spoliation and sanctions that can change the outcome of a case. To fulfill your obligations under these rules, you must to confront the issue of electronically stored information at the earliest possible time. The Advisory Committee notes that, depending on the circumstances of each case, counsel may need to Become familiar with the parties information systems Identify the various sources of such information within a party s control Determine whether or not such information is readily accessible Discuss the form or forms in which electronically stored information might be produced Discuss any issues regarding preservation of discoverable information Notes to Rule 26(f). To properly do this, there are four key areas that you need to consider and become familiar with: Key dates, key players, key data, and key words. Key Dates Relevant period of time for the litigation `Periods of time that data remains accessible within client's system Litigation deadlines Key Players Likely material witnesses Persons with relevant knowledge or information regarding claims or defenses Persons with relevant knowledge or information regarding electronic data systems, information 23

26 Key Data storage, retention and accessibility Electronically stored information that one would expect to be relevant to claims or defenses being asserted How is such information stored, accessed, preserved What is the retention policy and has it been complied with Key Words Words that are likely to relate to relevant information. Necessary in order to perform properly thorough searches of electronically stored information You need a good grasp of the facts in each of these four key areas in order to be in a position to comply with your disclosure and discovery obligations regarding electronically stored information. B. Accessibility of Electronically Stored Information Rule 26(b)(2)(B) of the Federal Rules of Civil Procedure excludes from discovery, at least initially, electronically stored information that is not reasonably accessible. In this regard, the rule states: A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. Note that a party asserting that electronic data is not readily accessible must identify that 24

27 data. The Advisory Committee Notes state that the identification should, to the extent possible, provide enough detail to enable the requesting party to evaluate the burdens and costs of providing the discovery and the likelihood of finding responsive information on the identified sources. 13 Thus, you have to tell the other side where it is that you are not looking for data that may be responsive to a discovery request or that should otherwise be included in your initial disclosures. The question, of course, is what is meant by the phrase reasonably accessible. That issue was considered in depth by Judge Scheindlin in Zubulake. And, as the amendments to Rule 26(b)(2)(B) essentially codified Judge Scheindlin s decision regarding the production of reasonably accessible data, Zubulake is likely to have continuing impact in this area. 14 As Judge Scheindlin noted, there are five types of storage for electronic data: (a) active, online data, (b) near-line data, (c) offline storage/archives, (d) backup tapes, and (e) erased, fragmented or damaged data. Of these, the first three categories are typically identified as accessible, and the latter two as inaccessible. The difference between the two classes is easy to appreciate. Information deemed accessible is stored in readily usable format. Although the time it takes to actually access the data ranges from 13 A party s identification of sources of electronically stored information as not reasonable accessible does not relieve the party of its common-law or statutory duties to preserve evidence. Advisory Committee Notes. 14 Judge Scheindlin s decisions in Zubulake have already been cited by federal more than 30 times this year in connection with issues pertaining to the discovery of electronically stored information. 25

28 milliseconds to days, the data does not need to be restored or otherwise manipulated to be usable. Inaccessible data, on the other hand, is not readily usable. Backup tapes must be restored..., fragmented data must be de-fragmented, and erased data must be reconstructed, all before the data is usable. That makes the data inaccessible. Zubulake I, 217 F.R.D. at ; footnotes omitted. Even if a party asserts and is able to convince the court that its data is not reasonably accessible, the court may still order that the data be produced. In this regard, Rule 26(b)(2)(B) provides that the court may nonetheless order discovery from such sources if the requesting party shows good cause... Advisory Committee notes: Note to Rule 26(b)(2). The decision whether to require a responding party to search for and produce information that is not reasonably accessible depends not only on the burdens and costs of doing so, but also on whether those burdens and costs can be justified in the circumstances of the case. To make this determination, the To make this determination, the Advisory Committee recommends consideration of the following factors: The specificity of the discovery request The quantity of information available from other and more easily accessed sources The failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources The likelihood of finding relevant, responsive information that cannot be obtained from other, more easily accessed sources 26

29 Predictions as to the importance and usefulness of the further information The importance of the issues at stake in the litigation The parties resources. Id. In conducting this good cause analysis, the burdens fall on the parties as follows: Id. On Responding Party: Must convince the court that the identified source are not reasonably accessible in light of the burdens and costs required to search for, retrieve and produce whatever responsive information may be found. On Requesting Party: Must convince the court that the need for the discovery outweighs the burdens and costs of locating, retrieving, and producing the information. The Advisory Committee has recognized that [t]he good-cause determination...may be complicated because the court and the parties may know little about what information the sources identified as not reasonably accessible might contain, whether it is relevant, or how valuable it may be to the litigation. In such cases, the parties may need some focused discovery, which may include sampling of the sources... Id. 27

30 C. Cost Shifting Rule 26(b)(2)(b) provides that, if a court orders the production of inaccessible electronically stored information, [t]he court may specify conditions for the discovery. This requires that the court consider whether or not to shift all or a part of the burden of the cost of producing the inaccessible data to the requesting party. Judge Scheindlin, in Zubulake, concluded that cost shifting needs only to be considered when dealing with data that is in an inaccessible format. See Zubulake I, 217 F.R.D. 309, 318 (S.D.N.Y. 2003). [C]ost-shifting is potentially appropriate only when inaccessible data is sought. When a discovery request seeks accessible data for example, active on-line or near-line data it is typically inappropriate to consider cost-shifting. Zubulake III, 216 F.R.D. at 284; court s italics. A similar result was reached by the court in Peskoff v. Faber, 240 F.R.D. 26, 31 (D.D.C. 2007). There the court stated, citing Zubulake III:...accessible data must be produced at the cost of the producing party; cost-shifting does not even become a possibility unless there is first a showing of inaccessibility. Thus, it cannot be argued that a party should ever be relieved of its obligation to produce accessible data merely because it may take time and effort to find what is necessary At least two courts, thus far, has disagreed with Zubulake and Peskoff on this point. Ameriwood Industries, Inc. v. Liberman, 2007 WL at *2 (E.D.Mo. 2007)( the judge concluded that the electronically stored information was inaccessible solely because of the cost and burden of retrieving it); Semsroth v. City of Wichita, 239 F.R.D. 630, 634 (D. Kan. 2006). 28

31 This potential of cost shifting creates a second hurdle for the requesting party to overcome. After successfully getting over the first hurdle by convincing the court that there is good cause to require the production of inaccessible electronically stored information, the requesting party must then confront the possibility that financial factors may prevent it from pursuing that information. D. Provisions re Privilege Waivers Note to Rule 26(b)(5). The Advisory Committee noted that it...has repeatedly been advised that the risk of privilege waiver, and the work necessary to avoid it, add to the costs and delay of discovery. When the review is of electronically stored information, the risk of waiver and the time and effort required to avoid it, can increase substantially because of the volume of electronically stored information and the difficulty in ensuring that all information to be produced has in fact been produced. The 2006 amendments to the rules contain provisions meant to minimize this cost. Rule 26(f), which deals with the parties pre-scheduling conference planning meeting requires that the parties discuss and develop a discovery plan that deals with...issues relating to claims of privilege or of protection as trial-preparation material, including if the parties agree on a procedure to assert such claims after production whether to ask the court to include their agreement in an order... Rule 26(f)(4). procedures: The Advisory Committee Notes provide two examples of such agreed upon 29

32 Note to Rule 26(b)(5). Quick Peek Agreements: Under such an agreement, the responding party produces the requested materials for inspection without waiving any privilege. The requesting party then designates which specific materials to wants to have actually produced. The responding party then screens those documents for privilege issues and asserts privilege claims as appropriate. Clawback Agreements: Under such agreements, the responding party produces the material requested and, should the responding party later determine that some of the material was privileged, the privileged material is to be returned with there being no waiver of the privilege. Rule 26(b)(5)(B) sets forth a procedure designed to deal with this issue if the parties fail to reach an agreement. The procedure established by the rule is, in essence, a clawback one. The procedure is as follows: If a party produces information that is privileged or is protected by the work product doctrine, the producing party is to notify the recipient of the claim and the basis for it. After such notification, the recipient must promptly return, sequester, or destroy the specified information and any copies it has and may not use or disclose the information until the claim is resolved. If the claim is disputed: The recipient of the information must preserve what it received until the claim is resolved The recipient may promptly present the information to the 30