NAVIGATING THE NEW WORLD OF ELECTRONIC DISCOVERY By David S. Curcio March 7, 2007 HISTORY OF THE NEW RULES Liberal discovery was first ushered in by the 1938 amendments to the federal rules, with expansions by later amendments. Changes to the rules made in the 1980 s and 1990 s focused on curbing abuses from wide-open discovery. Each time, a balance was struck between the openness of litigation and the cost of compliance. Now, that balance has been applied to the unique features of a digital world. The last time information technology was taken into account in amending the Federal Rules of Civil Procedure was 1970. As technology progressed, the rules provided inadequate guidance to litigants on handling computer-generated information. Individual courts were left to opine on rights and responsibilities on a case-by-case basis. Local rules were also created to try to adapt the existing rules to the new world. However, it became apparent that a comprehensive national approach was required. Electronic discovery issues have come up each time the federal rules of civil procedure have been amended in the last decade. The Advisory Committee on Civil Rules first considered problems with computer discovery in 1996 and intensive work began in 2000. Their mission was to devise mechanisms for providing full disclosure in a context where potential access to information is virtually unlimited and in which full discovery could involve burdens beyond anything justified by the interests of the parties to the litigation. 1 The Advisory Committee for Civil Rules was chaired by the Honorable Lee H. Rosenthal. After the Judicial Conference took a comprehensive look at electronic discovery issues, it circulated proposed rules for comment in August of 2004. The Advisory Committee heard from information technology professionals, as well as judges and lawyers. Once revised, the proposed Rules were submitted to the Supreme Court in September of 2005. The Supreme Court submitted the Rules to Congress in April of 2006 and, through Congressional inaction, they became effective December 1, 2006. ESI : ELECTRONICALLY STORED INFORMATION THE NEW RULES The new rules create a category of material called electronically stored information which is subject to discovery along with documents and things. The term is not specifically defined, partly because it is a fluid concept and a definition today could be outdated tomorrow. The new term appears in Rule 34(a): 1 Report of the Judicial Conference Committee on Rules of Practice and Procedure (Sept. 2005), http://www.uscourts.gov/rules/congress0406.html ( Report ).
Any party may serve on any other party a request (1) to produce and permit the party making the request, or someone acting on the requestor s behalf, to inspect, copy, test, or sample any designated 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 A generally accepted definition of ESI is information created, manipulated, communicated, stored, and best utilized in digital form, requiring the use of computer hardware and software. 2 UNIQUE FEATURES OF ESI ESI has important differences from paper documents. First and foremost is volume. Today, each terabyte in a corporate network represents 500 million pages of text. 60 billion e-mails are sent daily and over 99% of new information is stored electronically. 3 Multiple versions of one electronic document can exist on the hard drives and servers of numerous people, often in slightly different forms. Sifting through a mountain of data for information relevant to a particular case is time consuming and costly. ESI is also dynamic - it is constantly changing. Merely booting up a computer alters the data on its hard drive; it may even delete temporary files. An electronic document can be edited simultaneously by different people. Computers are constantly overwriting information, often without the user s knowledge or direction. While paper documents are usable by anyone fluent in the language in which the document is written, an electronic document requires software to be usable. When the data constituting a document is separated from the software in which it was created, it becomes useless. For example, although most word processor software can read multiple formats, spreadsheets and databases generally require unique software to be comprehensible. Finally, ESI is also more permanent than paper. Once properly shredded, a paper document is gone forever. However, when you delete an electronic file, its data is still on your hard drive. Computer forensic experts can dig deep and find data the user thought was long gone. 2 Withers, Kenneth J.; Electronically Stored Information: The December 2006 Amendments to the Federal Rules of Civil Procedure; Northwestern Journal of Technology and Intellectual Property (Vol. 4, No. 2; Spring 2006). 3 Isom, David K., Electronic Discovery Primer for Judges, 2005 Fed.Cts.L.Rev. 1, http://fclr.org/2005fedctslrev1.htm. Electronic Discovery Page 2
METADATA Another unique feature of ESI is metadata. Metadata contains information about the creation, alteration and management of an electronic file. It contains specific data about when and by whom the document was written, edited, to whom it was sent and its size. While it is not routinely visible to the user, it is maintained electronically and is linked to the document. Metadata has many benefits, and some dangers. A large volume of data from multiple custodians can be de-duplicated by comparing metadata so that only one version of a unique document is produced. The metadata can be searched to determine which documents a particular individual created, edited or viewed. However, it also contains information which the user may not be aware of, such as when and how the document was altered. Furthermore, some of this hidden information may be privileged or protected as trial preparation material. PRODUCTION OF ESI Depending on the case and the volume of potentially responsive ESI, there are several processes to be considered when producing ESI. First, the case may warrant that sources of potentially responsive information be mirrored as soon as litigation becomes likely. For example, if a manager is implicated in a harassment lawsuit, his hard drive and e-mail server could be mirrored so that all existing data is preserved as of a date certain. The mirror drive can then be secured for further use while the original drives are returned to routine use. Large volumes of ESI, mirrored or otherwise, will need to be filtered to exclude information of no relevance to the litigation. This will involve identifying: Key personnel whose ESI (including e-mails) should be preserved. Relevant dates. Key words relevant to the issues in the litigation. File types which may be particularly relevant (e.g., spreadsheets). A qualified vendor can help the client identify and process ESI. A proactive lawyer would have already discussed these issues with clients in anticipation of the need to preserve and produce ESI on short notice. 4 For example, a lawyer should be familiar with the clients electronic systems and the personnel who 4 A good general resource for clients is The Sedona Guidelines: Best Practice Guidelines & Commentary for Managing Information & Records in the Electronic Age (The Sedona Conference, Sept. 2005) which can be found at: http://www.thesedonaconference.org/publications_html?grp=wgs110. Electronic Discovery Page 3
operate and maintain them. 5 In addition, a lawyer should be familiar with the back-up and retention procedures of the client. INITIAL MEETING AND DISCLOSURES EARLY DISCUSSION: ESI Provisions have been added to Rule 16(b) requiring the parties to discuss electronic discovery issues at their initial meeting. The Advisory Committee wanted the parties and the court to focus on the frequently-recurring problems of the preservation of evidence and the assertion of privilege and work-product protection. Rule16(b)(5) includes a discussion of provisions for disclosure or discovery of electronically stored information. This could include discussion of agreements on: Form and format of production Timing of production, as well as possibility of a rolling production Nature and scope of available information and systems Key terms for searching Identification of key personnel (whose files should be preserved) Privilege log Exclusion of some or all metadata Preservation of inaccessible data Form 35 has been revised to include a description of proposals for handling ESI in the parties discovery plan as reported to the court. EARLY DISCUSSION: INADVERTENT PRODUCTION Rule 16(b)(6) requires an early discussion of any agreements the parties reach for asserting claims of privilege or of protection as trial-preparation material after production. Some examples of agreements include: Quick Peek : requesting party gets a quick overview of the data and tries to narrow the volume of production before a formal privilege review. For example, the requesting party s review could result in entire categories or sources of data being excluded from production (and any concomitant privilege review). Claw Back : producing party allowed to demand return of produced document after discovering its privileged or protected nature, without waiver. 5 A good litigation guideline for clients is Implementing an Effective Electronic Discovery Response Plan (LexisNexis Applied Discovery, June 2004) which can be found at: https://www.lexisnexis.com/applieddiscovery/lawlibrary/whitepapers/adi_wp_implementingediscovery Plan.pdf. Electronic Discovery Page 4
The parties need to keep in mind that any agreement they reach may not be binding on third parties. The new rules also specifically address inadvertent production of privileged or protected material. The volume of the [electronically stored] information and the forms in which it is stored may make privilege determinations more difficult and privilege reviews correspondingly more expensive and time consuming, yet less likely to detect all privileged information. 6 In recognition of the substantial risk of inadvertent production and the possibility for waiver, the rules encourage parties to agree on a procedure and also provide for a procedure in the absence of an agreement. If a party discovers that it produced data which it determines should have been withheld from production on the basis of privilege, the producing party must promptly notify the receiving party and state the basis for the privilege or protection from discovery. The receiving party must return, destroy or sequester the information. Either party can seek a court order on the privilege. Rule 26(b)(5). The producing party can seek the voluntary or compelled return or destruction of the privileged data. The requesting party can argue that the producing party waived the privilege as to the subject matter covered by the produced documents 7. The issue of waiver is also addressed in amendments proposed to the Federal Rules of Evidence. Under the proposed amendment to Rule 502, disclosure of privileged or protected information during discovery does not operate as a waiver if: (a) it was inadvertent; (b) the producing party took reasonable precautions to prevent disclosure and (c) the producing party made reasonable and prompt efforts to correct the error. If approved by Congress, the amended rule would take effect on December 1, 2008. INITIAL DISCLOSURES Initial disclosures of items that a party will use in support of its claims now includes electronically stored information in lieu of data compilations. Rule 26(a)(1). Thus, a party must disclose if ESI is involved and, if so, disclose ESI personnel with knowledge of systems and storage. Similarly, Rule 30(b)(6) depositions may now include personnel familiar with systems and data retention and can be used to guide substantive discovery. Alexander v. FBI, 188 F.R.D. 111 (D.D.C. 1998); Carbon Dioxide Industry Antitrust Litigation, 155 F.R.D. 209, 214 (M.D.Fla. 1993). REQUESTS FOR PRODUCTION 8 FORMAT OF ESI 6 7 8 Report at 27. The rules do not change or address the substantive law on privilege waiver. Corresponding changes are made to Rule 45 regarding subpoenas for business records. Electronic Discovery Page 5
Under amended Rule 34(b), the party requesting electronically stored information can specify the format in which it should be produced. The responding party can object to producing in the requested format and, if so, must specify an alternative. Otherwise, it should be produced in either the format in which it is routinely maintained or in a reasonably usable form. Producing the information in a form that can be used with software that is in general commercial use should suffice. 9 Also, a party should not impair the usability of data (e.g. by degrading electronic search capability) by translating data from the form in which it is routinely maintained. 10 The most common production format is an image file, either TIF or PDF. TIF stands for Tag Image File Format and it allows for bitmap images to be exchanged between applications. PDF stands for Portable File Format which also captures the elements of a document as an electronic image. Both are searchable and can be sequentially numbered before production. In addition, the electronic production can include metadata. Another alternative is native format. Native simply refers to the format created by whatever software was used to create the document. It is most useful for documents which require interaction with data, such as spreadsheets. However, data maintained in native format can change over time and cannot be electronically redacted or numbered. Absent a court order, ESI need only be produced in one format. Rule 34(b). The responding party has the option of responding to a request or interrogatory by allowing the requesting party access to its systems if the requesting party can find the answer as readily as the responding party can. Rule 33, 34. Also, in some circumstances courts have allowed the requesting party to have direct access to the electronic data systems of the responding party if that is necessary to afford the requesting party an adequate opportunity to derive or ascertain the answer to an interrogatory. 11 INACCESSIBLE DATA The new rules specifically address problems with the accessibility of electronic information. Under Rule 26(b)(2)(B): 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. Information that is reasonably accessible should be produced. The responding party must identify by source or type any information that is not reasonably accessible, and which is not being produced due to undue burden or cost. 12 This could include deleted 9 10 11 12 Report at App. C-67. Report at App. C-77. Report at App. C-69. Report at 30-31. Electronic Discovery Page 6
information, back-up tapes and legacy data from systems no longer in use. The cost of recovery, restoration or translation of such inaccessible information could be substantial. If challenged, the responding party bears the burden of proving that it is not reasonably accessible. The court will consider the burden and cost of locating, restoring and retrieving potentially responsive information in evaluating accessibility. 13 The requesting party may request sampling of some of the data, inspection of the sources and depositions of knowledgeable personnel to evaluate the burden and cost. However, even if the court determines that some data is not reasonably accessible, the court may nonetheless order discovery from such sources if the requesting party shows good cause. Rule 26(b)(2)(C). This would involve balancing the cost and burden against the need for the information in the particular case. Appropriate considerations include 14 : 1. the specificity of the discovery request; 2. the quantity of information available from other and more easily accessed sources; 3. the failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources; 4. the likelihood of finding relevant, responsive information that cannot be obtained from other more easily accessed sources; 5. predictions as to the importance and usefulness of further information; 6. the importance of the issues at stake in the litigation; and 7. the parties resources. The Comments recognize that the court must necessarily make educated guesses as to what may be revealed from the not reasonably accessible sources in comparison to the information already produced, and then balance that with the needs of the requesting party. Even if allowed, the court can set limitations as to discovery from sources that are not reasonably accessible. Lawyers sophisticated in these problems are developing a two-tier practice in which they first obtain and examine the information that can be provided from easily accessed sources and then determine whether it is necessary to search the difficult-toaccess sources. 15 The amended rules encourage the parties to discuss solutions; one 13 Whether inaccessible data needs to be preserved, even if not produced, is left to existing law and is not addressed by the rules. 14 Report at App. C-50. 15 Report at 31. Electronic Discovery Page 7
possible agreement could be a rolling production where the most accessible data is produced first with additional sources added, if necessary. Electronic Discovery Page 8
SAFE HARBOR AND LITIGATION HOLD Another key component of the new rules addresses the need for businesses to use their data in the midst of litigation and the fact that computer systems lose, alter, or destroy information as part of routine operations. 16 Therefore, Rule 37(f) provides that, Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to produce electronically stored information lost as a result of the routine, good-faith operation of an electronic information system. The key words here are routine and good faith. Routine means that the system was following its normal operations which were not established or altered due to the litigation. This could include reusing back-up tapes, purging old e-mail, updating spreadsheets and overwriting old data. Disrupting normal processes to preserve data complicates routine business operations and adds costs. Good faith, beyond the obvious meaning, also could implicate the requirement of parties to preserve relevant evidence. The amendment does not attempt to define, and does not change, the preservation obligations that arise from independent sources of law. 17 So, the safe harbor provisions of Rule 37(f) do not overcome the requirement of a party in litigation to preserve evidence. Good faith may require that a party intervene to modify or suspend certain features of the routine operation of a computer system to prevent the loss of information, if that information is subject to a preservation obligation. 18 Also, the safe harbor can be superseded by court order. Once a lawsuit is filed, outside counsel should write to the client advising them to establish a litigation hold to preserve all relevant ESI. 19 This should include e-mail boxes of key personnel and the suspension of routine destruction of back-up tapes which may contain relevant data. Similarly, automatic deletion of e-mails should be suspended for key personnel. These efforts must be documented in case the company s discovery compliance is challenged. This may be best accomplished by an outside vendor, experienced with preservation and able to independently document the procedures used. TEXAS RULES Rule 196.4 requires a party to specifically request electronic or magnetic data and specify the form in which the requesting party wants it produced. Therefore, a 16 17 18 Report at 32. Report at 32. Report at 34. 19 Keep in mind that when litigation is anticipated such that the attorney privileges apply, then the litigation hold should apply as well. Electronic Discovery Page 9
regular request for production will not include electronically stored information. A request for ESI must specify the format in which the data is to be produced. Any objection by the responding party must be specific. The responding party is obligated to produce responsive data that is reasonably available in ordinary course of business. If extraordinary steps are required to retrieve and produce required documents, the requesting party pays the cost. Any order for ESI production needs to be narrowly tailored to the case. In re Lowes, 134 S.W.3d 876, 880 (Tex. App. Houston [14 th Dist.] 2004, no writ). FORM OF PRODUCTION IMPORTANT CASES City of Dallas v. Ormsby, 904 S.W. 2d 707, 712 (Tex. App. Amarillo 1995, writ denied) (defendant ordered to produce electronic data used in creating an analytical memorandum). In Re CV Therapeutics, Inc. Securities Litigation, 2006 WL 2458720 (N.D.Cal. Aug. 22, 2006) (De-duplication and filtering of backup drives was reasonable). COST SHIFTING Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 321 (S.D.N.Y. 2003) ( Zubulake I ) (provides factors to consider in cost-shifting). GTFM v. Wal-Mart Stores, Inc., [WL] (S.D.N.Y. 2000) (counsel and client punished for failing to confirm availability of data with technical personnel). WAIVER OF PRIVILEGE Premier Digital Access, Inc. v. Central Telephone Co., 360 F.Supp.2d 1168 (D. Nev. 2005) (production of in-house counsel e-mail as part of e- mail box of employee to whom it had been forwarded held to be inadvertent). Long v. Marubeni America Corp., 2006 WL 1998671 (S.D.N.Y. 2006) (password-protected e-mail between corporate executives and attorney lost protection because it was sent on company computers). In re Ford Motor Co., S.W.3d, 50 Tex.S.Ct.J. 291, 2006 WL 3751574 (Tex. Dec. 22, 2006) (Confidentiality agreement enforced even as to documents inadvertently placed into the public domain by a court clerk in another case). Electronic Discovery Page 10
METADATA Amersham Biosciences Corp. v. PerkinElmer, Inc., 2007 WL 329290 (D.N.J. January 31, 2007) (overruled finding that reasonable precautions were taken to protect privileged documents because the documents were clearly privileged on their face). Wyeth v. Impax Laboratories, Inc., 2006 WL 3091331 (D.Del. 2006) (TIF production without metadata was sufficient). Kentucky Speedway, LLC v. NASCAR, Inc., unpublished (E.D.Ky. Dec. 18, 2006) (court follows emerging presumption against the production of metadata). Williams v. Sprint/United Management Co., [WL] (D.Kan. Sept. 29, 2005) (meta data should not be removed absent objection and ruling or agreement; following the Sedona principles). SPOLIATION AND SANCTIONS Coleman (Parent) Holdings, Inc. v. Morgan Stanley, Inc., 2005 WL 674885 (Fla.Cir.Ct. March 23, 2005) (spoliation instruction for failure to produce e-mails resulted in $1.4bb judgment. Defendant had a hard time locating and restoring data and would frequently supplement with large volumes of recently discovered information. The court found deliberate non-compliance). In Re Prudential Sales Practices Litigation, 169 F.R.D. 598, 615 (D.N.J. 1997) ($1 million sanction for haphazard and uncoordinated notices to employees to preserve ESI). Advante Int l Corp. v. Mintel Learning Tech., 2006 WL 3371576 (N.D. Cal., Nov. 21, 2006) ( Advante II ) (evidence of altered e-mails resulted in permission to image plaintiff s hard drives). U.S. v. Phillip Morris USA, Inc., 2004 WL 1627252 (D.D.C. 2004) (exclusion of key witness and $2.75 million sanction for routine destruction of relevant e-mails despite preservation order). Optowave Co. v. Nikitin, 2006 WL 3231422 (M.D.Fla. 2006) (spoliation instruction against sophisticated defendant which allowed hard drives to be reformatted and e-mails to be deleted). In re Napster, Inc. Copyright Litigation, 426 F.Supp.2d 1060, 1078 (N.D.Cal. 2006) (grossly negligent, but not willful, deletion of Electronic Discovery Page 11
communications sanctioned with adverse jury instruction, issue preclusion and attorney fees). Plasse v. Tyco Electronics Corp., 2006 WL 3445610 (D.Mass. 2006) (complaint dismissed based on forensic evidence of deletions of files from laptop before production of laptop). Ameriwood Industries, Inc. v. Liberman, 2006 WL 3825291 (E.D.Mo. 2006) (third-party production of defendant s e-mail which defendant had failed to produce resulted in order mirroring defendants computers). Crandall v. City of Denver, 2006 WL 2683754 (D.Col. 2006) (defendant avoided adverse inference instruction by restoring e-mails which had been routinely destroyed even after commencement of litigation). MISCELLANEOUS U.S. v. Arnold, 454 F.Supp.2d 999, 1007 (C.D.Cal. 2006) (x-raying and turning on laptop at customs checkpoint was reasonable, but examination of contents without reasonable suspicion was not reasonable). GLOSSARY Ghosting: Legacy: Metadata: Native: Making a bit by bit copy of a drive. (Not just copying data, but actually reproducing the hard drive.) ESI from older systems no longer actively supported and not easily accessible. Automatically created data identifying information about the history, tracking or management of an electronic file 20 ; e.g. author, date, revisions, recipients, e-mail attachments, etc. Generally, metadata is linked to the file, but not visible when viewing or printing the file. In some cases, it includes embedded edits deleted text from earlier versions. The electronic document format for a particular software (i.e..doc for MS Word;.xls for MS Excel, etc.) While most documents are the same in native format as when imaged, certain programs have additional data or features in their native format. For example, an image of a spreadsheet might only show numbers, while the native format would also include the formulas. The native format would also include metadata. However, unlike an 20 Report at App. C-83. Electronic Discovery Page 12
image, native format does not allowing numbering and the data can be altered. David S. Curcio 909 Fannin St., Suite 2350 Houston, Texas 77010 713-757-0000 dcurcio@blhc-law.com Electronic Discovery Page 13