New Electronic Discovery Rules Affect Parties in Litigation

The amount of electronic information that is being generated and stored by individuals and companies is exploding.  For many years, courts have often struggled when deciding how to proceed when issuing orders affecting the preservation, retrieval, and production of electronic information.  The federal courts have adopted new rules addressing the discovery of “electronically stored information” (“ESI”).  On January 1, 2007, similar rules became effective for California state courts as well.  There are some important components of the new rules, and practical steps, that every company should know. 

            Briefly, here are some of the highlights from the new federal rules:   

1.                  ESI is now expressly subject to discovery.  ESI now expressly falls within the category of information that is subject to discovery in civil litigation.  ESI includes writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations stored in any medium from which information can be obtained or translated.  Sources of ESI include data stored on computers, servers, back-up tapes and discs, hard drives, flash drives, PDAs (such as Blackberries), cell phones, smart phones, etc.  The rules permit a party making a discovery request to inspect, copy, test or sample ESI stored in any medium from which the information may be obtained. 

No company is immune to litigation.  Therefore, as a practical matter, companies must ensure there is someone familiar with the company’s data storage systems and available to communicate with counsel about all sources of ESI that could be subject to discovery before the company is embroiled in a lawsuit.  With so much crucial information now created and stored digitally in some form or another, this could save precious time when litigation arises. The lawyers can be brought up to speed and have access to crucial data that can assist in an early assessment of the strengths and weaknesses of a case.  Early access to data reduces the risk of unpleasant surprises later in litigation, after the company has already spent thousands of dollars in litigation costs.   

2.                  Safe Harbor Provision.  The rules create a safe-harbor provision that protects against sanctions for failing to produce ESI that is lost due to routine, good-faith operation of an electronic information system.  Therefore, a company should have a documented, global retention policy in place that specifies how long information is kept, what type of information is retained and for how long, and what type of information is destroyed and when information is destroyed.  Procedures should be in place to ensure the document retention policy is enforced.  A good document retention policy can be defense against catastrophic litigation consequences that result from a claim that the company has destroyed evidence. 

Absent a regulation governing how long certain information must be retained, or absent a “litigation hold” (discussed below), courts generally expect companies  to retain electronic information only as long as is necessary and practical for business purposes.  Despite a document retention (or destruction) policy, a company may have an obligation to implement a “litigation hold” to retain data that may be discoverable in litigation.  This obligation arises even before a lawsuit arises.  Generally, a litigation hold should be implemented when a company receives sufficient information to place it on notice that there is a credible threat of litigation.  This does not necessarily mean waiting until a complaint is filed against the company.  Instead, a litigation hold could be required after receiving a demand letter or other threats or actions that give rise to the potential for future litigation.  A litigation hold does not require a company to suspend its entire document retention/destruction policy, just preserve data that might be relevant to the potential litigation. 

3.                  Early Meet and Confer Requirements.  Lawyers must meet and confer early in the case to address all possible issues concerning the discovery of ESI.  The lawyers must discuss the sources of ESI for each party; whether the ESI will be produced, or whether there are some sources of ESI that will not be produced because it is not “reasonably accessible” (i.e. too burdensome or expensive to produce); the format for which the ESI will be produced; and privilege issues that may arise in connection with the production of ESI.

4.                  Disputes over ESI that is “reasonably accessible.”  The new rules draw a distinction between “accessible” data and data that is “not reasonably accessible.”  Accessible data would be information stored on hard drives or back up disks that are easily accessed.  Inaccessible data would include erased or fragmented data, or data stored on obsolete back up systems.  The producing party may argue that this type of data is not reasonably accessible because it would be unduly burdensome and expensive to retrieve.  Absent a court order, the responding party does not need to produce information from sources that the responding party identifies as not being reasonably accessible.  The party requesting the information can then file a motion with the court and ask the court to compel production. 

On a motion to compel production, the court follows a two-step process when reaching a decision.  First, the party objecting to production has the burden of showing that the information is unduly burdensome or expensive to produce.  If the responding party meets this burden, then the court may order discovery only if good cause is shown to require the production.  This provides a balanced approach that favors the production of relevant materials from the more easily accessible sources, while identifying other sources of information that the requesting party may wish to pursue.  Responding parties should be careful to ensure that all sources of information are identified and disclosed, not just those sources from which ESI will be produced.  Drastic consequences (such as monetary sanctions and evidentiary sanctions) could result if information is lost or destroyed from sources that were not disclosed during discovery.     

5.                   Format for Production of ESI. The party requesting discovery may specify the form of production for the ESI; however, this is not required.  If the requesting party does not request a form of production, or the producing party objects to the form requested, the producing party must specify the form in which the information will be produced – either (i) in a form in which the information is ordinarily maintained, or (ii) in a reasonably usable form.  Parties should understand the consequences of producing ESI in its “native” format.  Producing documents in their native format may create problems in document management such as bate-stamping or redacting privileged information.  There may also be problems associated with native files and their metadata that can be modified or manipulated.  Other reasonably usable, and searchable, formats such as searchable TIFF and PDF files may be preferable. 

6.                  Privilege and Attorney-Work Product.  Because of the high volume of ESI that is often produced, there is a great risk that privileged or attorney work product documents could be inadvertently produced.   The rules contain a procedure that allows a party that has inadvertently produced privileged information to assert a claim protecting the material as privileged or work product.  Under the rule, a party seeking to establish a privilege or work product protection must notify the party receiving the information about the claim and grounds for the claim.  The party receiving the information must then either return, sequester, or destroy the specified information.  The receiving party may promptly submit the materials to the court under seal for a determination of the privilege claim.  The rule does not address whether the privilege was waived.  But the rule prohibits a party receiving the information from using it until the privilege claim is resolved.

*  *  *

This is intended to be a general and brief overview of some of the electronic discovery rules that became effective recently, and their practical effect.  This is not intended to be a complete list of all of the electronic discovery rules, their analysis, or their implications.