E-Discovery: The Federal Rules in the Digital Age

On December 1, 2006, new amendments to the Federal Rules of Civil Procedure governing the conduct of litigation in the United States federal courts took effect -- the culmination of more than five years of drafting, discussion and public comment. Language inserted into six separate Federal Rules -- 16, 26, 33, 34, 37 and 45 -- now guides lawyers and their clients on the implications of litigating in the digital age. Primarily, the new rules address the discovery of electronically stored information, or "ESI": e-mails, spreadsheets, word files, PowerPoint presentations, databases, accounting and cost records and countless other data compilations that may never be reduced to hard-copy format.

On December 1, 2006, new amendments to the Federal Rules of Civil Procedure governing the conduct of litigation in the United States federal courts took effect — the culmination of more than five years of drafting, discussion and public comment. Language inserted into six separate Federal Rules — 16, 26, 33, 34, 37 and 45 — now guides lawyers and their clients on the implications of litigating in the digital age. Primarily, the new rules address the discovery of electronically stored information, or “ESI”: e-mails, spreadsheets, word files, PowerPoint presentations, databases, accounting and cost records and countless other data compilations that may never be reduced to hard-copy format.

The old rules adequately facilitated the exchange of hard-copy information between parties litigating with one another. Why, then, the need for “new” rules? After all, the “content” of the information sought in discovery — what we have to say, explain or describe to one another about a transaction, medical procedure, employment termination or injury, as examples– has not changed drastically. What has changed? The relative ease with which people now communicate in the digital age, which has resulted in an exponential increase in the volume of information created and shared.

“Data” is created in almost limitless new ways. With a couple of keystrokes or the press of a few buttons, information can be sent to hundreds of different individuals in seconds, who may then store the information in multiple locations. Yesterday’s filing cabinets have been replaced by servers, back-up tapes, laptops, desktop computers, voicemail, cell phones and BlackBerries, all of which, at any given time, may store data that could become relevant to a lawsuit. Add to this the ease with which massive amounts of information can be generated, and the fact that some data is incomprehensible when separated from its source, and you gain insight into the formidable challenge facing the framers of the amended rules. The newly amended Federal Rules are designed to accomplish an evenhanded, cost-efficient and timely exchange of information relevant to the dispute between the parties.

The new amendments require lawyers and their clients to understand and be prepared to facilitate the exchange of electronically stored information with proficiency and limited judicial intervention. As lawyers, we have been inundated with information regarding the obligations and challenges presented by the amended rules. This article, on the other hand, was written for businesspeople — to help you focus upon the practical impacts the amended rules will have upon your operations and to provide guidance on (1) the importance of familiarizing yourself with the IT infrastructure of your company prior to the onset of litigation; (2) the necessity of a proactive pre-litigation strategy for maintaining and destroying electronic information; (3) the need to examine and review electronically stored information early in litigation; and (4) the obligations and requirements upon the parties once litigation has been initiated.

Your company’s failure to have a game plan for meeting the requirements of the new rules could have significant adverse consequences. First, attorneys’ fees and litigation costs can be unnecessarily higher than is already the case with lawsuits over business transactions. Second, the likelihood of a positive litigation result or acceptable settlement could be seriously diminished. Finally, a proactive approach will lessen the interruption to your daily operations when litigation does arise.

Early Attention to e-Discovery Matters

The amended rules require that parties be prepared to discuss electronic discovery issues at the outset of litigation. Businesses that expect litigation as an unwanted by-product of their operations, therefore, should acquaint outside counsel with the company’s IT environment and those responsible for managing that environment before the next dispute arises. In fact, under the rules, outside litigation counsel has an affirmative obligation to become familiar with your company’s IT infrastructure and what electronically stored information exists. In order to be prepared to meet your lawyer’s request for information about your company’s ESI, consider the following tasks that will face you and your lawyer once litigation arises:

No later than 100 days after the filing of a lawsuit, clients must be prepared to discuss and make cost-driven decisions on important electronic discovery issues such as: (1) the format in which electronic documents will be produced; (2) the manner in which electronic documents will be preserved by the parties; and (3) the assertion of privilege to protect electronically stored information.1 These early discussions between client and lawyer are critical to your effective participation in the “meet and confer” conference required by Rule 26(f), which is followed by a report to the court on the status of electronic discovery, so that the court may incorporate issues pertaining to electronically stored information into its initial scheduling order governing discovery in the case.2 This information provides the court with the ability to address outstanding electronic discovery issues upon which the parties cannot agree, and set clear expectations for the preservation, collection and production of this important body of evidence.

The need to meet and strategize well in advance of any requirement imposed by the rules is reinforced by Rule 26(a)(1)(B), which was amended to require that a party identify in its initial disclosures to the opposing party electronically stored information it may use to support its claims and defenses in the litigation.3 Concerns were initially raised about this amendment to Rule 26, as litigants argued that the new rules required the identification and review of large volumes of electronic information at the outset of litigation, before a party had adequately explored its claims and gathered pertinent supporting information. While the Rules Committee recognized the burdens placed upon the parties, they nonetheless determined that the benefits of early identification of electronic discovery issues outweigh any burden placed upon the parties.4 The good news is that early identification and review of electronic documents can be used as an opportunity to assess the merits of one’s case before proceeding with lengthy, drawn-out and costly litigation.

Pre-litigation involvement on the part of outside counsel will help prepare your company’s personnel and your legal team for an actual lawsuit; lessen the burden imposed upon daily operations if litigation arises; heighten efficiency in collecting, reviewing and producing documents; and ultimately result in cost savings. Litigants no longer have months to prepare for electronic discovery after the lawsuit is filed. That preparation effort should occur when a party reasonably anticipates a lawsuit being filed.

Reasonable Anticipation of Litigation

When you or your company makes a decision to file a lawsuit or believes that it is about to be sued — in other words, when litigation is reasonably anticipated — the time has come to take additional affirmative steps with respect to the capture, preservation and production of electronically stored information, per both the amended Federal Rules and recently decided federal court cases. This includes the institution of a “litigation hold” upon potentially relevant electronic information and the involvement of outside counsel to manage the efforts to collect and produce electronically stored information.

The Litigation Hold

In performing routine electronic document cleanup and destruction procedures, or in a single keystroke by an employee, electronic information critical to a case can be lost forever. This reality underscores the importance of instituting a “litigation hold” on all relevant information when a party reasonably anticipates that litigation may occur. In times past, when litigation was reasonably anticipated, parties were instructed by their attorneys to begin collecting all relevant hard-copy documents in a secure location in their office to prevent destruction and to prepare for production in discovery. In the era of electronic documents, things are no longer so simple or straightforward.

The dangers of failing to familiarize yourself with the types of electronically stored information that are created by your company, and where that information is stored, are serious, and could make or break your case. It is better to investigate now and prepare to deal with the issues created by electronic discovery before litigation arises.

Electronic information can be accessed by multiple users at any given time, via interoffice computers or the Internet. Moreover, electronic information is stored in numerous, varying locations and, in many instances, can be easily transported outside of the physical boundaries of the office on electronic storage devices such as CDs, DVDs, laptop computers, jump drives, and BlackBerries. This portability, coupled with unlimited access and multiple data storage locations, makes the collection and preservation of electronic information much more complex. Nonetheless, the amended rules and the courts have held that the duty to preserve relevant information extends not only to hard-copy documents, but also to electronically stored information.5 This duty arises at the time that litigation is reasonably anticipated by a party, and extends to any information, data or documents, including electronically stored information, that might be useful to your adversary in litigation.6 Properly instituting a litigation hold requires that the following steps be taken as soon as litigation is anticipated:

  • First, a party must issue a litigation-hold notice to all employees and parties who may have relevant information, instructing them to preserve, and not to destroy, any information that may be relevant to the anticipated litigation.

  • Second, the IT department must be instructed to suspend all document destruction and retention policies in effect that may result in the spoliation of information relevant to the anticipated litigation.

  • Third, the company must diligently monitor the preservation and collection efforts of its employees, on an ongoing basis, to ensure that litigation-hold procedures are being adhered to by all. The body of electronic information is always changing as documents are created, edited and deleted, thereby expanding and contracting the scope of the litigation hold in place. New employees are hired, employees leave the company, new software packages are rolled out, and work continues on projects that are headed for litigation. All of these events have a profound effect upon the body of electronically stored information that should be gathered and retained, making it imperative that compliance with the litigation hold be monitored.7

Notably, the duty to preserve electronic information does not extend to every single byte of electronic information that may be relevant. Courts have recognized the undue burden and costs associated with locating every shred of paper, e-mail or electronic document that exists for production to the opposing party in litigation.8 Therefore, amended Rules 26(b)(2)(B) and 45(d)(1)(D) distinguish between electronic data that is “reasonably accessible” and that which is not, requiring collection and production of only the former in litigation.9 Both rules state, in part, “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.”[^10] Courts have yet to weigh in on the parameters of “reasonably accessible” electronic information, but this limitation nonetheless provides some relief to companies incurring the time and expense necessary to preserve electronic data in litigation.

Courts have developed a second limitation on the obligation to preserve electronically stored information, holding that the duty to preserve extends only to “those employees likely to have relevant information, i.e., the ‘key players’ in the litigation.”10 By identifying the key individuals at your company who will have relevant information regarding the anticipated litigation, the scope of the litigation hold may be drastically limited. While it is advisable to cast a wide net to ensure a comprehensive and effective litigation hold and to avoid claims of spoliation in the future, this limitation also allows companies to significantly cut costs and time spent on litigation.

The “Meet and Confer”

As discussed above, amended Rule 26(f) requires that the parties discuss, no later than 100 days into litigation, important electronic discovery issues, including, but not limited to, the format in which electronic documents will be produced, the manner in which electronic documents will be preserved by the parties, and the assertion of privilege to protect electronically stored information. The meet-and-confer conference may have a substantial impact upon the parties’ electronic discovery obligations; thus, litigants should assist counsel in understanding in advance of the conference the electronically stored information they have to produce, the cost implications of collecting and producing those electronic documents, and the resources they can dedicate to completion of this task. The importance of the decisions made at the meet-and-confer conference are easily discernible through a closer look at various consequences:

  • There are significant cost implications to the production of electronic documents, both in the vendor expense necessary to prepare and package the documents for production and the professional time needed to review the documents for privileged and non-responsive materials. If the scope of the document production is broad, costs escalate significantly. By exploring ways to limit the universe of documents to be produced, costs can be controlled.

  • There are technical issues that must be overcome in order to produce certain types of electronic information. Attorneys must take care not to agree to production of certain types of documents in certain formats, without conferring with the appropriate technical personnel to ensure that such production can be accomplished in a cost-effective and efficient manner. Furthermore, parties may agree to certain production specifications, only to learn later the significant costs of a production in accordance with the agreement.

  • Generally speaking, any agreements reached in the “meet and confer” will be mutual — in other words, both parties will be obligated to comply with the terms of the agreement. Therefore, parties must consider not only the electronic information they have to produce and the format in which they would like to produce it, but also the information sought from the opposing party and the manner in which that information should be preserved for purposes of the litigation. Parties can gain a distinct advantage by securing certain electronic documents in formats useful to case preparation.

Understanding Your IT Infrastructure

The amended rules contemplate that the parties will be prepared to deal with electronic document issues early in litigation. Moreover, there are added responsibilities after litigation has been initiated, so little, if any, time exists to approach these issues after a lawsuit is filed. Waiting too long could result in your company’s personnel having to sift through hundreds of thousands of pages of electronic information in a limited period of time, under court order. As a result, companies should gain and maintain a current working knowledge of the amounts, authors, recipients and storage locations of ESI to avoid this costly and time-consuming scenario.

Identify the types of storage devices utilized by your company. The first step to understanding an IT infrastructure is to identify the various types of devices used by your business to create, store and transmit electronic information. This includes not only those items in employee offices, but also the hardware utilized by the IT department to make all of these devices operate, including servers, back-up tapes and devices of similar import. In identifying the various devices used by your company, it is important to realize that the true interest is in locating ESI that may be relevant to litigation in the future. The contents of any device that stores electronic information or data will be fair game for production in discovery.

Identify specific types of electronically stored information. Next, you need to understand the types of electronically stored documents and data compilations that are created and maintained by your company daily: documents, spreadsheets, accounting records, calendars, databases, e-mails and voicemails, to name a few. Each of these separate types of files carries with it its own unique issues regarding the relevant information it contains and the format in which it should be produced in litigation.

Although each company’s electronic documents are unique, and they all come with their own issues to be resolved, one piece of advice remains constant: you must know and understand the information your electronically stored documents reveal to the opposing party before producing the same in litigation. For example, e-mails are often a prime source of relevant information in litigation today. When an e-mail is drafted, sent, forwarded, stored or deleted, certain information such as the date, time and author, sometimes referred to as “metadata,” is embedded and stored with the electronic e-mail file. As a result, when an e-mail is produced in electronic form in litigation, all of this accompanying information is likewise produced, even though the information may not appear on the face of the e-mail itself. Therefore, the opposing party will be able to determine who originally drafted the e-mail, who viewed or received the e-mail, and when each person had access to such e-mail. This information, when used in litigation, can play a critical role.

Know your routine document retention and destruction policies, procedures and practices. Finally, every company should know and understand its routine document retention and destruction policies, procedures and practices. Document management has become a hot-button issue in litigation in recent years, as routine electronic document retention and destruction procedures and practices have led to the destruction or spoliation of relevant evidence in numerous cases — a problem that can devastate a party’s likelihood of success.

Companies generate massive amounts of electronic information. In reality, the costs of storing all such information, and retaining it indefinitely, would burden even the largest corporations. Therefore, almost all businesses have in place policies, procedures and practices to routinely discard out-of-date, unused or unwanted electronic information. For example, with respect to e-mail correspondence, many companies will routinely delete e-mails older than 30 days that have not been archived into an individual’s e-mail files. Moreover, many individual employees institute their own practices regarding the retention or deletion of electronic files in the normal course of business. While such routine procedures are necessary and permissible prior to the anticipation of litigation, all such practices and destruction of documents must be suspended at a point when litigation is reasonably anticipated. If you are not familiar with the practices and procedures in place both companywide and on an individual basis, immediate suspension of document destruction is likely not to occur, leaving open the possibility that pertinent information will be destroyed.

Don’t be caught unaware. While it may seem unnecessary or particularly time consuming to proactively familiarize yourself with the IT infrastructure of your company, the implications of not doing so make it time well spent. Failure to prepare now may result in:

  • An inability to produce relevant information that may be helpful to your case;

  • A failure to have the information necessary to prove your claims and defenses;

  • Added costs and attorneys’ fees to fight discovery battles over the production of ESI, claims of spoliation and motions for summary judgment;

  • Added costs for the forensic retrieval of ESI deleted from the company’s computer systems; and

  • Adverse inferences, exclusions of evidence and/or sanctions by the court due to spoliation of relevant evidence.

An Ounce of Prevention is Worth a Pound of Cure

At first blush, producing electronically stored information may seem as simple as burning a CD or DVD from your desktop computer in your office to send via certified mail to opposing counsel. Be forewarned, however, that the production of ESI is much, much more. It is a process that takes significant time, resources, personnel and expertise to complete. A number of issues may arise in dealing with ESI under the procedures set forth in the amended rules, and it would not be advisable to forge ahead without the appropriate resources to fully meet your discovery obligations, minimize costs and posture yourself for a successful outcome of the case.

The dangers of failing to familiarize yourself with the types of electronically stored information that are created by your company, and where that information is stored, are serious, and could make or break your case. It is better to investigate now and prepare to deal with the issues created by electronic discovery before litigation arises.

Affirmative steps you can take:

  • Plan ahead for dealing with electronic discovery by becoming familiar with your company’s IT infrastructure, the location of ESI and document retention and destruction practices.

  • With the assistance of counsel, devise a strategy at the outset of litigation for collecting, reviewing and producing ESI in a cost-effective, efficient manner.

  • Be prepared to address the issues that will inevitably arise in conferring with the opposing party regarding the production of electronic documents, including the format in which electronic documents will be produced, the manner in which electronic documents will be preserved by the parties, and the scope of the parties’ preservation obligations.

  • Understand the cost and time implications of participating in discovery in the electronic age, and factor these considerations into decisions regarding settlement and the merits of your case.

Endnotes


  1. Report of the Civil Rules Advisory Committee, May 27, 2005; Fed. R. Civ. P. 26(f) (revised Dec. 1, 2006). 

  2. Fed R. Civ. P. 16 (revised Dec. 1, 2006). 

  3. Fed. R. Civ. P. 26(a)(1)(B) (revised Dec. 1, 2006). 

  4. Report of the Civil Rules Advisory Committee, May 27, 2005. 

  5. Fed. R. Civ. P. 26 (revised Dec. 1, 2006). 

  6. Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003); see also Zubulake v. UBS Warburg, LLC, 229 F.R.D. 422, 431 (S.D.N.Y. 2004). 

  7. Zubulake, 229 F.R.D. at 432-34. 

  8. Zubulake, 220 F.R.D. at 217. 

  9. Fed. R. Civ. P. 26(b)(2)(B) and 45(d)(1)(D) (revised Dec. 1, 2006).
    [^10]:* Id*. 

  10. Zubulake, 220 F.R.D. at 217-18.