E-DISCOVERY IN THE US

Transcription

1 E-DISCOVERY IN THE US A PRIMER Changing legal requirements and growing volumes of electronically stored information have made the discovery process more daunting and costly than ever before. This article reviews the key issues that companies and their counsel must understand to ensure compliance with their electronic discovery (e-discovery) obligations and provides guidance on proactive steps to efficiently manage company information. 44 November 2013 practicallaw.com

2 BROWNING E. MAREAN III SENIOR COUNSEL DLA PIPER Browning is co-chair of the firm s Electronic Discovery Readiness and Response group. He concentrates his practice in the areas of electronic discovery, professional responsibility and knowledge management. Browning is co-author of the 2010 edition of Electronic Discovery and Records Management Guide, Rules, Checklists and Forms, published by Thomson West, and Conducting Discovery in an Electronic World: Electronic Data and Discovery, published by California Civil Discovery Practice. JOSHUA BRIONES PARTNER DLA PIPER Joshua is co-chair of the firm s Social Media group and a member of the Electronic Discovery Readiness and Response group. He advises clients on compliance with state and federal laws that govern the use and disclosure of consumer information. Joshua is co-author of the legal practice guide, Social Media as Evidence: Cases, Practice Pointers and Techniques, published by the American Bar Association. ANAHIT (ANA) TAGVORYAN ASSOCIATE DLA PIPER Ana is a member of the firm s Class Action, Social Media and Electronic Discovery Readiness and Response groups. She focuses her practice on consumer class actions, business torts, contract disputes and unfair competition claims. Ana is co-author of the legal practice guide, Social Media as Evidence: Cases, Practice Pointers and Techniques, published by the American Bar Association. Article Illustration by Stephen Prevost of Practical Law. Practical Law The Journal Litigation November

3 E-discovery refers to the disclosure of electronically stored information (ESI) as part of the discovery process in litigation. The basic legal framework governing a litigant s duty to disclose (and right to receive) ESI is, in many ways, no different from the legal framework governing the disclosure of paper documents. However, e-discovery poses several unique challenges that are not as prevalent with traditional paper discovery. For example, in today s business environment, the volume of discoverable ESI may dwarf the amount of discoverable paper documents. Additionally, figuring out where all potentially relevant ESI is housed and devising a strategy to efficiently identify and collect this information requires a technological expertise that was not required in the age of paper discovery. This article provides an overview of the key issues that companies and their counsel must consider to ensure that they comply with their legal duties to preserve and produce relevant ESI in litigation. In particular, it explains: The definition of ESI and how ESI differs from hard-copy documents. The importance of having a records management program in place. The legal duty to preserve ESI and the consequences of failing to preserve ESI. The main steps of the process to properly preserve and produce ESI. The ESI-related issues that counsel should address at the initial discovery conference. WHAT IS ESI? The Uniform Rules Relating to the Discovery of Electronically Stored Information define ESI as any information that is stored in an electronic medium and is retrievable in perceivable form. The Federal Rules of Civil Procedure (FRCP) also broadly define ESI to include writings, drawings, graphs, charts, photographs, sound recordings, images and other data or data compilations (FRCP 34(a)). Some obvious forms of ESI include s and attachments, Excel spreadsheets and word processing documents such as those produced in Microsoft Word. However, there are many other types of ESI that may be less obvious. For example, voic s, text messages, internet history logs, social media sites and profiles, and computer videos also qualify as ESI. The definition of ESI can even extend to electronically stored metadata (that is, information about a particular piece of ESI, such as a document s length, author and creation date). DIFFERENCES FROM HARD-COPY DOCUMENTS ESI has several distinctive features from its hard-copy counterparts. For example, unlike paper documents: Turning a computer on and off or accessing a particular file can alter or destroy ESI. Computer systems may automatically discard or overwrite ESI as part of their routine operations. Computers can create ESI without the operator s direction or awareness. Although ESI may be deleted, it usually continues to exist (in forms that are often difficult to locate, retrieve or search) and may be recovered with the help of a computer forensics expert. ESI may be incomprehensible when it is separated from the system creating it. WHERE ESI IS LOCATED ESI may reside almost anywhere. In short, if a computerized device (or service) has a memory capacity, that device (or service) is probably a repository for ESI. For example, ESI can exist on computer hard drives, phones (including smart phones), voic systems, Blackberries and other mobile devices, tablets, compact discs, floppy disks and thumb drives. ESI can also exist on social media websites such as Facebook, Twitter and LinkedIn, corporate accounts, internet-based accounts and even the memory chips of digital copiers. Network backup tapes are frequently the largest (and most overlooked) repositories for ESI. Companies often use backup tapes to store copies of their employees ESI for certain periods of time as a safeguard against company-wide data loss. MANAGING COMPANY INFORMATION IN THE ORDINARY COURSE OF BUSINESS Companies routinely identify, retain and dispose of records in the ordinary course of business. It is important for companies to implement a records management program that addresses the policies and procedures for how they expect employees to handle company information and provides a systematic approach to record preservation and deletion. An effective records management program helps to ensure that a company preserves those records it is legally required to retain, or should retain for business reasons, and discards those records that are no longer useful or legally required. Of course, companies and their counsel must be familiar with the various laws and regulations governing records retention and ensure that their records retention practices conform to these legal requirements. BENEFITS OF A RECORDS MANAGEMENT PROGRAM A properly-administered records management program may provide a company with several significant benefits, such as: Minimizing the high costs of storing and maintaining ESI and other information in the ordinary course of business. An effective records management program enables an organization to dispose of worthless records and free up physical or digital storage space, reduce requirements for handling and managing the records, and make retrieval of information more efficient and economical. Reducing the time and cost involved in searching for, collecting and producing ESI and other information in litigation. By implementing a records management program, a company can more easily determine whether it still has certain corporate documents from a particular time period. This can help guide company personnel in their search for relevant records. 46 November 2013 practicallaw.com

4 Having a company-wide records retention program in place may help make evident to a judge or government agency that the company had a legitimate business purpose for destroying the information. Demonstrating that the company had a legitimate purpose for destroying ESI and other information. If ESI and other information that are now relevant to a lawsuit or investigation were previously destroyed by the company before it reasonably anticipated the lawsuit or investigation (see below Duty to Preserve ESI), having a company-wide records retention program in place may help make evident to a judge or government agency that the company had a legitimate business purpose for destroying the information. Protecting the company from certain legal claims. A records management program can help shield a company against claims based on old and trivial documents drafted by current or former employees who may not be able to put their words in the proper context (due to fading memories, for example). Search Drafting a Document Retention Policy for information on the primary considerations when drafting a document retention or recordkeeping policy. DESTROYING ESI It is important to have specific procedures in place for the deletion of electronic files. For example, deleted ESI may still exist on the magnetic medium where it was originally housed and may be recoverable by computer forensics experts. To ensure that intentionally-deleted ESI is not recoverable, companies should consider physically destroying the magnetic medium on which the ESI is located. However, permanent destruction of ESI can be difficult because copies of a single file may reside in numerous locations, some of which may not even be accessible by the company s system administrator (such as an employee s internet-based personal account). DUTY TO PRESERVE ESI A company s duty to preserve ESI is generally the same as its duty to preserve hard-copy documents. Companies and other potential litigants have a duty to preserve all relevant information (both ESI and hard-copy documents) as soon as they know or reasonably anticipate that they will become involved in litigation or a government investigation (see Orbit One Commc ns, Inc. v. Numerex Corp., 271 F.R.D. 429, 436 (S.D.N.Y. 2010)). The duty to preserve may be triggered in various ways. For example: A plaintiff has a duty to preserve relevant information once it begins to seriously contemplate filing a lawsuit. A defendant has a duty to preserve relevant information once it has notice of a credible threat of litigation and certainly once it is served with the complaint. A non-party s duty to preserve may be triggered when it receives a subpoena in connection with a pending lawsuit or government investigation. Although litigants have a duty to preserve relevant ESI, companies do not need to hunt for, identify and produce every single piece of ESI that might conceivably be relevant to a lawsuit or investigation. Instead, courts expect that in-house and outside counsel will make a good faith effort to uncover the key, underlying facts. The producing party should be able to articulate why its efforts were reasonable given the circumstances and facts of the case and why requiring anything else would be unduly burdensome. In short, defensibility is what matters, and defensibility is largely dependent on taking a proactive approach (as soon as reasonably possible) in the collection and production of ESI. CONSEQUENCES OF NOT PRESERVING ESI As with the destruction of relevant paper documents, companies and other litigants face severe sanctions for destroying ESI that may be relevant to a lawsuit or government investigation after the duty to preserve has been triggered. The improper destruction of evidence is commonly known in the US as spoliation. The penalties for spoliation can include monetary sanctions, contempt citations, adverse inference jury instructions and dismissal of the spoliating party s claims or defenses. Generally, the penalty imposed by a court depends on the state of mind of the spoliating party (see Orbit One Commc ns, Inc., 271 F.R.D. at ). For example, a party who intentionally or recklessly destroys relevant ESI after the duty to preserve has been triggered usually faces a stiffer penalty than a party who was merely negligent in destroying ESI. Further, a company may be sanctioned for spoliation caused by its employees even if the company s management instituted and maintained a proper litigation hold (see below Issuing a Written Litigation Hold). However, absent exceptional circumstances, Practical Law The Journal Litigation November

5 Best Practices to Preserve and Produce ESI Properly preserving and producing ESI is not an easy task. In fact, it can be one of the most tedious, time-consuming and expensive exercises a party undertakes during a lawsuit or government investigation. However, with proper preparation and attention to detail, companies and their counsel should be able to avoid some of the more common pitfalls that arise in the e-discovery context. Companies and their counsel should: Have a discovery plan ready to implement at the first sign of impending litigation. Implement a document retention policy and procedures for preserving backup tapes (for a sample policy, search Document Retention Policy on our website). Cease document and ESI destruction practices once the preservation duty is triggered. Identify key locations of ESI and important file types. Avoid conducting do-it-yourself ESI collection unless the company has employees who are properly trained in handling digital data. Never overlook metadata preservation. Recognize that deleting ESI from one medium does not necessarily mean that the ESI does not exist on other media. Be aware that the company s IT department may not be able to shoulder the e-discovery burden alone. Carefully choose an electronic evidence expert. Use an online repository tool for paper and electronic document review. a court may not impose sanctions on a litigant for failing to provide ESI that was lost as a result of the routine, good-faith operation of an electronic information system (FRCP 37(e)). Digital realities increase the risk that a party or its counsel may be charged with spoliation. This is because, in part: Not all clients take the threat of harm due to spoliation seriously given that it seems so easy to delete, alter or eliminate a digital file or social media post. Destruction of ESI is generally easier to prove than destruction of paper documents because destroyed ESI may still exist elsewhere on a company s network (such as on another employee s account). ESI that is thought to be destroyed may continue to reside in its original medium (but merely overwritten with other ESI) and may be recoverable by a computer forensics expert. COMPLYING WITH THE DUTY TO PRESERVE AND PRODUCE ESI In many cases, companies must cast a wide net to ensure that all potentially relevant ESI (and other information) is preserved and produced. However, companies can often narrow the scope of ESI that must be preserved and produced by working with the other side to strike a reasonable balance early in the lawsuit. For example, litigants can agree at the initial discovery or pre-trial conferences to produce only a subset of the available ESI that is most relevant to the parties claims (FRCP 16, 26(f)). This may include ESI authored by specific individuals, drafted during a certain time period or related to a particular subject matter. Companies and their counsel should view compliance with the duty to preserve and produce ESI (and other information) as a continuing process that involves several steps. These steps include: Issuing a written litigation hold. Locating ESI. Preserving ESI. Collecting ESI. Reviewing ESI. Producing ESI. ISSUING A WRITTEN LITIGATION HOLD Once the duty to preserve is triggered, the company must issue a written litigation hold notice to its employees directing them not to destroy ESI or other information that may be relevant to the litigation or government investigation. The hold notice basically serves as a freeze on the company s routine record disposal activities. Search Litigation Hold Notice or see page 18 in this issue for a sample hold notice, with explanatory notes and drafting tips. The litigation hold notice should describe the types of ESI and other information that must be preserved in sufficient detail, so that company employees can easily identify which information must be retained and which may be discarded under the company s normal business practices. The failure to issue a written hold notice as soon as the duty to preserve arises may expose the company to severe sanctions (see Chin v. Port Auth., 685 F.3d 135, 162 (2d Cir. 2012)). The hold notice should be reissued to the appropriate employees periodically and 48 November 2013 practicallaw.com

6 updated to include any ESI and other information that becomes relevant but may not have been included in previous versions of the hold notice. The company must communicate directly with those employees who are known to be key players in the lawsuit or investigation, and clearly advise them of their duty to preserve relevant ESI and other information (see Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, (S.D.N.Y. 2004)). Counsel should instruct these key players (and all other employees covered by the litigation hold) to preserve and produce electronic copies of their relevant active files in addition to hard-copy documents (see Zubulake, 229 F.R.D. at 434). The company may also need to communicate directly with other employees, depending on the circumstances. For example, IT personnel usually must be notified to ensure that all relevant backup tapes are preserved. As a general rule, companies must preserve backup tapes that are the sole source of relevant information (for example, if the active files of key players are no longer available), although there is no need to save or search backup tapes when the same information is also available on accessible data (see Nycomed U.S. Inc. v. Glenmark Generics Ltd., No , 2010 WL , at *9 n.13 (E.D.N.Y. Aug. 11, 2010)). The company s records management administrators also should be notified to ensure that routine document destruction is stopped. In addition to sending a litigation hold notice to its employees, the company should consider sending a hold notice to its various consultants, agents and affiliates. In the US, parties involved in litigation have a duty to preserve and produce any designated documents and ESI that are under their control even if that information is in another entity s physical possession (see FRCP 34(a), 45(a)(1)(A)(iii)). A party has control over another entity s documents and ESI if it has the legal right to obtain the information from that entity or if it regularly receives documents and ESI from that entity upon request during the normal course of business (Nycomed U.S. Inc., 2010 WL , at *7; SEC v. Credit Bancorp, Ltd., 194 F.R.D. 469, 472 (S.D.N.Y. 2000)). Search Protecting Foreign Corporations from US Discovery for information on how US courts may order foreign companies to produce documents in US litigation through their US affiliates. LOCATING ESI Locating all relevant ESI poses one of the biggest logistical challenges for companies involved in litigation or a government investigation. ESI can reside on virtually any electronic medium, ranging from computer hard drives to backup tapes (see above Where ESI Is Located). As part of their efforts to locate all relevant ESI, counsel should interview each key employee involved or implicated in the lawsuit or investigation to determine where that employee stores data. The company may not know the full extent of an employee s document management habits unless counsel actually speaks with the employee. An employee may save data on his office computer, home computer, laptop, internet-based account, Blackberry or other mobile device, tablet and on portable thumb drives. Counsel must also work closely with the company s IT personnel. This step is important for several reasons. Key employees may not know where all of their data is stored and may sometimes be less than forthcoming with corporate management regarding the location of their files. Additionally, non-key employees may have relevant ESI and not even know it. In these situations, IT personnel can be invaluable in seeking out and locating all potential sources of relevant ESI. Counsel should work with IT personnel to: Perform a network-wide word search for ESI containing employee names or other keywords that would likely show up in ESI that is relevant to the lawsuit or investigation. Create a data map, describing where in the company s network the relevant ESI is housed. Find network backup tapes and deleted or overwritten files that may contain relevant ESI. PRESERVING ESI In connection with its search for ESI, a company must take reasonable steps to properly preserve all relevant ESI and other discovery material. Both in-house and outside counsel should be intimately involved with the ongoing preservation efforts. Company management, IT personnel and counsel should work together to: Train employees on how to properly preserve ESI and other information. The company should consider sending a hold notice to its various consultants, agents and affiliates. In the US, parties involved in litigation have a duty to preserve and produce any designated documents and ESI that are under their control even if that information is in another entity s physical possession. Practical Law The Journal Litigation November

7 Related Content The following is a selection of related resources that can be found on practicallaw.com >> Simply search the resource title RELATED CONTENT Practice Notes Document Requests: Performing the Document Review Document Requests: What to Expect in Response to an RFP Drafting a Document Retention Policy Implementing a Litigation Hold Practical Tips for Handling E-Discovery Standard Documents Confidentiality Agreement (Order) (Federal) Fed. R. Evid. 502(d) Order Litigation Hold Notice Document Retention Policy Privilege Log Standard Clause Privilege Waiver Clause with Claw-back Provision Checklists This box can be found on the right side of the screen. Document Discovery Planning Tree Considerations When Selecting an E-Discovery Vendor Checklist Document Retention Policy: US Checklist E-Discovery Project Management Checklist First Steps for Identifying and Preserving Electronic Information Checklist Being Prepared for E-Discovery Checklist Questions to Ask a Prospective E-Discovery Vendor Checklist Continually check on and communicate directly with employees to ensure they comply with the litigation hold and all relevant ESI is preserved. Closely monitor the company s records management administrators to ensure that the company s records retention practices (such as automatic firm-wide disposals) comply with the litigation hold. COLLECTING ESI After identifying the locations where relevant ESI may be stored, the company must start collecting the ESI. In addition to (or instead of) having employees search for relevant ESI themselves, corporate management and counsel may want to collect the ESI or have an e-discovery vendor undertake the ESI collection efforts to ensure the integrity of the search. If the company decides to use an outside vendor, it must keep in mind that although vendors can eliminate some of the anxiety of discovery, they still need supervision. The consequences of not preserving and producing all relevant ESI ultimately fall on the company (and its counsel), not the outside vendor. Once the relevant ESI has been collected, it must be segregated and safeguarded to ensure that it is not lost or destroyed. Search Considerations When Selecting an E-Discovery Vendor Checklist and Questions to Ask a Prospective E-Discovery Vendor Checklist for information on selecting an e-discovery vendor. REVIEWING ESI Once the company has identified and collected all relevant (and reasonably accessible) ESI, counsel must review that information before turning it over to the requesting party. Undertaking a careful and systematic review before production is essential to ensure that the company does not disclose trade secrets or other commercially-sensitive data. A thorough review also helps to ensure that the company does not waive the attorney-client privilege or work product protection by inadvertently producing privileged or protected documents to the requesting party. Although the FRCP and the Federal Rules of Evidence (FRE) offer safeguards against inadvertent waivers, companies still may risk waiving the privilege or other evidentiary protection if they do not perform any type of privilege review (FRCP 16(b), 26(b)(5)(B); FRE 502). Additionally, counsel must know what ESI and other information the company has produced to its adversary to properly prepare for litigation or settlement. Search Fed. R. Evid. 502(d) Order for a sample order that can be used by parties in federal civil litigation to protect against waiver of the attorney-client privilege or work product protection, with explanatory notes and drafting tips. PRODUCING ESI There are various rules that address the production of ESI in litigation. The FRCP offers guidance on how to produce ESI in federal litigation, and many federal courts have established local 50 November 2013 practicallaw.com

8 If an objection is made on the grounds that the source where the ESI is located is reasonably accessible, the party (or non-party) resisting discovery bears the burden of demonstrating that production from that source would result in undue burden or cost. rules, guidelines and protocols dealing with e-discovery. State courts may have their own e-discovery rules as well. In federal litigation, a party must produce ESI as it is kept in the usual course of business or must organize and label the ESI to correspond to the categories in the document request or subpoena, unless the court orders otherwise (FRCP 34(b)(2)(E)(i)). If a request does not specify a form for producing ESI, a party must produce it in a form (or forms) in which it is ordinarily maintained or in a reasonably usable form (or forms) (FRCP 34(b)(2)(E)(ii)). However, a party does not need to produce the same ESI in more than one form (FRCP 34(b)(2)(E)(iii)). These rules also apply to a non-party responding to a subpoena (FRCP 45(d)(1)(A)-(C)). Significantly, a party (or non-party) producing ESI in response to a document request or subpoena does not need to provide ESI from sources that are identified as not reasonably accessible because of undue burden or cost (for example, backup tapes used solely for disaster recovery purposes) (FRCP 26(b)(2)(B), 45(d)(1)(D)). However, if an objection is made on the grounds that the source where the ESI is located is reasonably accessible, the party (or non-party) resisting discovery bears the burden of demonstrating that production from that source would result in undue burden or cost (FRCP 26(b)(2)(B), 45(d)(1)(D)). a sample initial disclosure statement, with explanatory notes and drafting tips, search Initial Disclosures on our website). Discuss any issues that may arise regarding the preservation of discoverable ESI. Develop a proposed discovery plan that addresses, among other things, any issues that may arise about the disclosure or discovery of ESI, including the form or forms in which ESI should be produced. (FRCP 26(f)(2)-(3).) Because of the relatively short timeframe between the beginning of the lawsuit and the discovery conference, the process of locating, collecting and preserving ESI must begin as soon as possible. At the Rule 26(f) conference, a company should be in a position to identify: The sources of the company s ESI that are not likely to contain relevant documents. ESI that is not reasonably accessible. The locations and forms in which responsive ESI is stored. DISCOVERY CONFERENCE FRCP 26(f) requires the parties in a federal lawsuit to meet and confer to discuss discovery issues, including issues specifically related to e-discovery, before the court issues its scheduling order. This Rule 26(f) conference usually takes place within a couple of months after the lawsuit commences. Search First Stages of Litigation Timeline for an outline of the typical progression of a lawsuit in federal court during the first six months, as set out in the FRCP. Among other obligations associated with the Rule 26(f) conference, the parties must: Provide or arrange to provide initial disclosures under FRCP 26(a), including a copy or a description by category and location of all ESI that the party has in its possession, custody or control and may use to support its claims or defenses (for Use of Practical Law websites and services is subject to the Terms of Use ( and Privacy Policy ( Practical Law The Journal Litigation November